<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
Commission file number 0-23968
CNL INCOME FUND XIII, LTD.
(Exact name of registrant as specified in its charter)
Florida 59-3143094
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
450 South Orange Avenue
Orlando, Florida 32801
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (407) 540-2000
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class: Name of exchange on which registered:
None Not Applicable
Securities registered pursuant to section 12(g) of the Act:
Units of limited partnership interest ($10 per Unit)
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes X No ____
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
Aggregate market value of the voting stock held by nonaffiliates of the
registrant: The registrant registered an offering of 4,000,000 units of limited
partnership interest (the "Units") on Form S-11 under the Securities Act of
1933, as amended. Since no established market for such Units exists, there is
no market for such Units. Each Unit was originally sold at $10 per Unit.
DOCUMENTS INCORPORATED BY REFERENCE:
None
<PAGE>
PART I
Item 1. Business
CNL Income Fund XIII, Ltd. (the "Registrant" or the "Partnership") is a
limited partnership which was organized pursuant to the laws of the State of
Florida on September 25, 1992. The general partners of the Partnership are
Robert A. Bourne, James M. Seneff, Jr. and CNL Realty Corporation, a Florida
corporation (the "General Partners"). Beginning on March 31, 1993, the
Partnership offered for sale up to $40,000,000 of limited partnership interests
(the "Units") (4,000,000 Units at $10 per Unit) pursuant to a registration
statement on Form S-11 under the Securities Act of 1933, as amended, effective
March 17, 1993. The offering terminated on August 26, 1993, at which date the
maximum offering proceeds of $40,000,000 had been received from investors who
were admitted to the Partnership as limited partners (the "Limited Partners").
The Partnership was organized to acquire both newly constructed and
existing restaurant properties, as well as properties upon which restaurants
were to be constructed (the "Properties"), which are leased primarily to
operators of national and regional fast-food and family-style restaurant chains
(the "Restaurant Chains"). Net proceeds to the Partnership from its offering of
Units, after deduction of organizational and offering expenses, totaled
$35,324,831. The net offering proceeds were used to acquire 47 Properties,
including ten Properties consisting of only land, two Properties owned by joint
ventures in which the Partnership is a co-venturer, and one Property acquired as
tenants-in-common with affiliates of the General Partners, to pay acquisition
fees to an affiliate of the General Partners totaling $2,200,000, to pay
miscellaneous acquisition expenses and to establish a working capital reserve
for Partnership purposes. During the year ended December 31, 1996, the
Partnership sold its Property in Richmond, Virginia, consisting of land only,
and reinvested the proceeds in a Burger King Property located in Akron, Ohio,
with an affiliate of the General Partners as tenants-in-common, in 1997. In
addition, during the year ended December 31, 1997, the Partnership sold its
Property in Orlando, Florida, to a third party and reinvested the net sales
proceeds in a Chevy's Fresh Mex Property located in Miami, Florida, with an
affiliate of the General Partners as tenants-in-common. During the year ended
December 31, 1999, the Partnership sold its Jack in the Box Property in Houston,
Texas. As a result of the above transactions, as of December 31, 1999, the
Partnership owned 46 Properties. The 46 Properties include eight Properties
consisting of land only, interests in two Properties owned by joint ventures in
which the Partnership is a co-venturer and three Properties owned with
affiliates as tenants-in-common. The lessee of the eight Properties consisting
of land only, owns the buildings currently on the land and has the right, if not
in default under the lease, to remove the buildings from the land at the end of
the lease terms. The Partnership generally leases the Properties on a triple-
net basis with the lessees responsible for all repairs and maintenance, property
taxes, insurance and utilities.
The Partnership will hold its Properties until the General Partners
determine that the sale or other disposition of the Properties is advantageous
in view of the Partnership's investment objectives. In deciding whether to sell
Properties, the General Partners will consider factors such as potential capital
appreciation, net cash flow and federal income tax considerations. Certain
lessees also have been granted options to purchase Properties, generally at the
Property's then fair market value after a specified portion of the lease term
has elapsed. The Partnership has no obligation to sell all or any portion of a
Property at any particular time, except as may be required under property
purchase options granted to certain lessees.
On March 11, 1999, the Partnership entered into an Agreement and Plan of
Merger with CNL American Properties Fund, Inc. ("APF"), pursuant to which the
Partnership would be merged with and into a subsidiary of APF (the "Termination
of Merger"). APF is a real estate investment trust whose primary business is
the ownership of restaurant properties leased on a long-term, "triple-net" basis
to operators of national and regional restaurant chains. Under the Agreement
and Plan of Merger, APF was to issue shares of its common stock as consideration
for the Merger. On March 1, 2000, the General Partners and APF announced that
they had mutually agreed to terminate the Agreement and Plan of Merger. the
agreement to terminate the Agreement and Plan of Merger was based, in large
part, on the General Partners' concern that, in light of market conditions
relating to publicly traded real estate investment trusts, the value of the
transaction had diminished. As a result of such diminishment, the General
partners; ability to unequivocally recommend voting for the transaction, in the
exercise of their fiduciary duties, had become questionable.
Leases
Although there are variations in the specific terms of the leases, the
following is a summarized description of the general structure of the
Partnership's leases. The leases of the Properties owned by the Partnership and
joint ventures in
1
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which the Partnership is a co-venturer provide for initial terms ranging from 6
to 20 years (the average being 19 years), and expire between 2000 and 2018. All
leases are generally on a triple-net basis, with the lessees responsible for all
repairs and maintenance, property taxes, insurance and utilities. The leases of
the Properties provide for minimum base annual rental payments (payable in
monthly installments) ranging from approximately $27,400 to $191,900. A majority
of the leases provide for percentage rent, based on sales in excess of a
specified amount. In addition, the majority of the leases provide that,
commencing in specified lease years, the annual base rent required under the
terms if the lease will increase.
Generally, the leases of the Properties provide for two to five five-year
renewal options subject to the same terms and conditions as the initial lease.
Lessees of 36 of the Partnership's 46 Properties also have been granted options
to purchase Properties at the Property's then fair market value after a
specified portion of the lease term has elapsed. Fair market value will be
determined through an appraisal by an independent appraisal firm. Under the
terms of certain leases, the option purchase price may equal the Partnership's
original cost to purchase the Property (including acquisition costs), plus a
specified percentage from the date of the lease or a specified percentage of the
Partnership's purchase price, if that amount is greater than the Property's fair
market value at the time the purchase option is exercised.
The leases also generally provide that, in the event the Partnership wishes
to sell the Property subject to that lease, the Partnership first must offer the
lessee the right to purchase the Property on the same terms and conditions, and
for the same price, as any offer which the Partnership has received for the sale
of the Property.
In June 1998, Long John Silver's, Inc. filed for bankruptcy and rejected
the leases relating to three of the eight Properties that it leased and ceased
making rental payments to the Partnership under such leases. In October 1998,
the Partnership entered into a new lease with a new tenant to operate one of the
rejected Properties as a Lion's Choice restaurant. In November 1998, the
Partnership entered into a new lease with a new tenant for one of the rejected
Properties to operate the location as a Steak-n-Shake restaurant. The
Partnership entered into a new lease with a new tenant for the remaining
Property with a rejected lease in May 1999. The new tenant will operate the
Property as an Arby's restaurant. The lease terms for these three Properties
are substantially the same as the Partnership's other leases as described above.
In August 1999, Long John Silver's, Inc. assumed and affirmed its five remaining
leases and the Partnership has continued receiving rental payments relating to
these five leases.
During 1999, the lease relating to the Property in Penn Hills,
Pennsylvania, was amended to provide for a rent reduction from October 1999
through the end of the lease term due to the tenant filing for bankruptcy in
1998, as described above. However, the General Partners do not anticipate that
any decrease in rental income relating to this amendment to have a material
adverse affect on the Partnership's financial position or results of operations.
Major Tenants
During 1999, four lessees of the Partnership, Flagstar Enterprises, Inc.,
Long John Silver's, Inc., Golden Corral Corporation and Jack in the Box Inc.,
each contributed more than ten percent of the Partnership's total rental income
(including the Partnership's share of rental income from two Properties owned by
joint ventures and three Properties owned with an affiliate of the General
Partners as tenants-in-common). As of December 31, 1999, Flagstar Enterprises,
Inc. was the lessee under leases relating to 11 restaurants, Long John Silver's,
Inc. was the lessee under leases relating to five restaurants, (excluding three
restaurants for which Long John Silver's, Inc. rejected the leases as a result
of filing for bankruptcy, as described above), Golden Corral Corporation was the
lessee under leases relating to three restaurants and Jack in the Box Inc. was
the lessee under leases relating to four restaurants. It is anticipated that,
based on the minimum rental payments required by the leases, Flagstar
Enterprises, Inc., Golden Corral Corporation and Jack in the Box Inc. each will
continue to contribute more than ten percent of the Partnership's total rental
income in 2000. In addition, five Restaurant Chains, Long John Silver's,
Hardee's, Golden Corral Family Steakhouse Restaurants ("Golden Corral"), Jack in
the Box and Burger King, each accounted for more than ten percent of the
Partnership's total rental income during 1999 (including the Partnership's share
of rental income from two Properties owned by joint ventures and three
Properties owned with affiliates of the General Partners as tenants-in-common).
It is anticipated that these five Restaurant chains each will continue to
account for more than ten percent of the Partnership's total rental income under
the terms of the leases in 2000. Any failure of these lessees or Restaurant
Chains could materially affect the Partnership's income if the Partnership is
not able to re-lease the Properties in a timely manner. No single tenant or
group of affiliated tenants lease Properties with an aggregate carrying value in
excess of 20 percent of the total assets of the Partnership.
2
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Joint Venture and Tenancy in Common Arrangements
The Partnership has entered into two separate joint venture arrangements:
Attalla Joint Venture and Salem Joint Venture, with CNL Income Fund XIV, Ltd., a
limited partnership organized pursuant to the laws of the State of Florida and
an affiliate of the General Partners, for each joint venture to purchase and
hold one Property. The joint venture arrangements provide for the Partnership
and its joint venture partner to share in all costs and benefits associated with
the joint ventures in accordance with their respective percentage interests in
the joint ventures. The Partnership has a 50 percent interest in Attalla Joint
Venture and a 27.8% interest in Salem Joint Venture. The Partnership and its
joint venture partner are also jointly and severally liable for all debts,
obligations and other liabilities of the joint ventures.
Attalla Joint Venture and Salem Joint Venture have initial terms of 30
years and, after the expiration of the initial term, each joint venture
continues in existence from year to year unless terminated at the option of
either of the joint venturers or by an event of dissolution. Events of
dissolution include the bankruptcy, insolvency or termination of any joint
venturer, sale of the Property owned by the joint venture and mutual agreement
of the Partnership and its joint venture partners to dissolve the joint venture.
The Partnership shares management control equally with an affiliate of the
General Partners for Attalla Joint Venture and Salem Joint Venture. The joint
venture agreements restrict each venturer's ability to sell, transfer or assign
its joint venture interest without first offering it for sale to its joint
venture partner, either upon such terms and conditions as to which the venturers
may agree or, in the event the venturers cannot agree, on the same terms and
conditions as any offer from a third party to purchase such joint venture
interest.
Net cash flow from operations of Attalla Joint Venture and Salem Joint
Venture is distributed 50 percent and 27.8%, respectively, to the Partnership
and the balance is distributed to each other joint venture partner in accordance
with its percentage interest in the joint venture. Any liquidation proceeds,
after paying joint venture debts and liabilities and funding reserves for
contingent liabilities, will be distributed first to the joint venture partners
with positive capital account balances in proportion to such balances until such
balances equal zero, and thereafter in proportion to each joint venture
partner's percentage interest in the joint venture.
In addition to the above joint venture agreements, the Partnership entered
into agreements to hold an Arby's Property, as tenants-in-common, with CNL
Income Fund II, Ltd., a Burger King Property, as tenants-in-common, with CNL
Income Fund XVII, Ltd., and a Chevy's Fresh Mex Property, as tenants-in-common,
with CNL Income Fund III, Ltd., CNL Income Fund VII, Ltd., and CNL Income Fund
X, Ltd. Each of the CNL Income Funds is an affiliate of the General Partners
and is a limited partnership organized pursuant to the laws of the State of
Florida. The agreements provide for the Partnership and the affiliates to share
in the profits and losses of the Properties in proportion to each co-tenant's
percentage interest. The Partnership owns a 66.13%, 63.09%, and 47.83% interest
in these Properties, respectively. The tenancy in common agreements restrict
each party's ability to sell, transfer, or assign its interest in the tenancy in
common's Property without first offering it for sale to the remaining parties.
The use of joint venture and tenancy in common arrangements allows the
Partnership to fully invest its available funds at times at which it would not
have sufficient funds to purchase an additional property, or at times when a
suitable opportunity to purchase an additional property is not available. The
use of joint venture and tenancy in common arrangements also provides the
Partnership with increased diversification of its portfolio among a greater
number of properties. In addition, tenancy in common arrangements may allow the
Partnership to defer the gain for federal income tax purposes upon the sale of a
Property if the proceeds are reinvested in an additional Property.
Certain Management Services
CNL Fund Advisors, Inc., an affiliate of the General Partners, provides
certain services relating to management of the Partnership and its Properties
pursuant to a management agreement with the Partnership. Under this agreement,
CNL Fund Advisors, Inc. is responsible for collecting rental payments,
inspecting the Properties and the tenants' books and records, assisting the
Partnership in responding to tenant inquiries and notices and providing
information to the Partnership about the status of the leases and the
Properties. CNL Fund Advisors, Inc. also assists the General Partners in
negotiating the leases. For these services, the Partnership has agreed to pay
CNL Fund Advisors, Inc. an annual fee of one percent of the sum of gross rental
revenues from Properties wholly owned by the Partnership plus the Partnership's
allocable share of gross revenues of joint ventures in which the Partnership is
a co-venturer and the Properties held as tenants-in-common with an affiliate,
but not in excess of competitive fees for comparable services.
3
<PAGE>
The management agreement continues until the Partnership no longer owns an
interest in any Properties unless terminated at an earlier date upon 60 days'
prior notice by either party.
Employees
The Partnership has no employees. The officers of CNL Realty Corporation
and the officers and employees of CNL American Properties Fund, Inc. ("APF"),
the parent company of CNL Fund Advisors, Inc., perform certain services for the
Partnership. In addition, the General Partners have available to them the
resources and expertise of the officers and employees of CNL Financial Group,
Inc. (formerly CNL Group Inc.) a diversified real estate company, and its
affiliates, who may also perform certain services for the Partnership.
Item 2. Properties
As of December 31, 1999, the Partnership owned 46 Properties. Of the 46
Properties, 41 are owned by the Partnership in fee simple, two are owned through
joint venture arrangements and three are owned through tenancy in common
arrangements. See Item 1. Business - Joint Venture and Tenancy in Common
Arrangements. The Partnership is not permitted to encumber its Properties under
the terms of its partnership agreement. Reference is made to the Schedule of
Real Estate and Accumulated Depreciation for a listing of the Properties and
their respective costs, including acquisition fees and certain acquisition
expenses.
Description of Properties
Land. The Partnership's Property sites range from approximately 19,900 to
145,400 square feet depending upon building size and local demographic factors.
Sites purchased by the Partnership are in locations zoned for commercial use
which have been reviewed for traffic patterns and volume.
The following table lists the Properties owned by the Partnership as of
December 31, 1999 by state. More detailed information regarding the location of
the Properties is contained in the Schedule of Real Estate and Accumulated
Depreciation.
State Number of Properties
----- --------------------
Alabama 3
Arkansas 1
Arizona 2
California 1
Colorado 1
Florida 10
Georgia 1
Indiana 1
Kansas 1
Louisiana 1
Maryland 1
North Carolina 1
Ohio 4
Pennsylvania 3
South Carolina 2
Tennessee 5
Texas 8
-----
TOTAL PROPERTIES 46
=====
Buildings. Each of the Properties owned by the Partnership includes a
building that is one of a Restaurant Chain's approved designs. However, the
buildings located on the eight Checkers Properties are owned by the tenant while
the land parcels are owned by the Partnership. The buildings generally are
rectangular and are constructed from various combinations of stucco, steel,
wood, brick and tile. The sizes of the building owned by the Partnership range
from approximately 1,900 to 11,500 square feet. All buildings on Properties are
freestanding and surrounded by paved parking areas. Buildings are suitable for
conversion to various uses, although modifications may be required prior to use
for other than restaurant operations. As of December 31, 1999, the Partnership
had entered into an agreement to pay up to
4
<PAGE>
$194,743 in renovation costs to renovate a Property from a Long John Silver's
restaurant into an Arby's Restaurant. Depreciation expense is computed for
buildings and improvements using the straight-line method using a depreciable
life of 40 years for federal income tax purposes. As of December 31, 1999, the
aggregate cost of the Properties owned by the Partnership and joint ventures
(including the Properties owned through tenancy in common arrangements) for
federal income tax purposes was $19,267,657 and $2,297,308, respectively.
The following table lists the Properties owned by the Partnership as of December
31, 1999 by Restaurant Chain.
Restaurant Chain Number of Properties
---------------- --------------------
Arby's 2
Burger King 5
Checkers 8
Chevy's Fresh Mex 1
Denny's 3
Golden Corral 3
Hardee's 11
Jack in the Box 4
Lion's Choice 1
Long John Silver's 5
Quincy's 1
Steak-N-Shake 1
Wendy's 1
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TOTAL PROPERTIES 46
=====
The General Partners consider the Properties to be well-maintained and
sufficient for the Partnership's operations.
The General Partners believe that the Properties are adequately covered by
insurance. In addition, the General Partners have obtained contingent liability
and property coverage for the Partnership. This insurance is intended to reduce
the Partnership's exposure in the unlikely event a tenant's insurance policy
lapses or is insufficient to cover a claim relating to the Property.
Leases. The Partnership leases the Properties to operators of selected
national and regional fast-food restaurant chains. The leases are generally on
a long-term "triple net" basis, meaning that the tenant is responsible for
repairs, maintenance, property taxes, utilities and insurance. Generally, a
lessee is required, under the terms of its lease agreement, to make such capital
expenditures as may be reasonably necessary to refurbish buildings, premises,
signs and equipment so as to comply with the lessee's obligations, if
applicable, under the franchise agreement to reflect the current commercial
image of its Restaurant Chain. These capital expenditures are required to be
paid by the lessee during the term of the lease. The terms of the leases of the
Properties owned by the Partnership are described in Item 1. Business - Leases.
At December 31, 1999, 1998, 1997, 1996 and 1995, the Properties were 100%,
98%, 100%, 100%, 100%, and 100% occupied, respectively. The following is a
schedule of the average rent per Property for the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Rental Revenues (1) $3,727,854 $3,482,136 $3,822,053 $3,778,319 $3,923,423
Properties 46 47 47 46 47
Average Rent Per Property $ 81,040 $ 74,088 $ 81,320 $ 82,137 $ 83,477
</TABLE>
(1) Rental income includes the Partnership's share of rental income from the
Properties owned through joint venture arrangements and the Properties
owned through tenancy in common arrangements. Rental revenues have been
adjusted, as applicable, for any amounts for which the Partnership has
established an allowance for doubtful accounts.
5
<PAGE>
The following is a schedule of lease expirations for leases in place as of
December 31, 1999 for the next ten years and thereafter.
<TABLE>
<CAPTION>
Percentage of
Number Annual Rental Gross Annual
Expiration Year of Leases Revenues Rental Income
--------------- ----------- ------------------- -----------------
<S> <C> <C> <C>
2000 1 $ 34,800 1.00%
2001 -- -- --
2002 -- -- --
2003 1 34,260 .98%
2004 -- -- --
2005 -- -- --
2006 -- -- --
2007 1 37,763 1.08%
2008 2 347,428 9.97%
2009 2 247,783 7.11%
Thereafter 39 2,782,595 79.86%
----------- ------------------- ----------------
Total 46 $3,484,629 100.00%
=========== =================== ================
</TABLE>
Leases with Major Tenants. The terms of the leases with the Partnership's
major tenants as of December 31, 1999 (see Item 1. Business - Major Tenants),
are substantially the same as those described in Item 1. Business - Leases.
Flagstar Enterprises, Inc. leases 11 Hardee's restaurants. The initial
term of each lease is 20 years (expiring in 2013) and the average minimum base
annual rent is approximately $58,400 (ranging from approximately $48,800 to
$65,700).
Long John Silver's, Inc. leases five Long John Silver's restaurants. The
initial term for four of the leases is 20 years (expiring in 2013) and the
initial term of the fifth lease, which the Partnership assumed from an
unrelated, third party in connection with the acquisition of the related
Property, is six years (expiring in 2000). The General Partners will seek to
re-lease this Property, or to sell the Property upon the expiration of the
lease. The average minimum base annual rent is approximately $82,821 (ranging
from approximately $34,800 to $118,100).
Golden Corral Corporation leases three Golden Corral restaurants. The
initial term of each lease is 15 years (expiring between 2008 and 2009) and the
average minimum base annual rent is approximately $177,900 (ranging from
approximately $168,600 to $186,200).
Jack in the Box Inc. leases four Jack in the Box restaurants. The initial
term of each lease is 18 years (expiring between 2010 and 2011) and the average
minimum base annual rent is approximately $87,628 (ranging from approximately
$65,100 to $101,000).
Competition
The fast-food and family-style restaurant business is characterized by
intense competition. The restaurants on the Partnership's Properties compete
with independently owned restaurants, restaurants which are part of local or
regional chains, and restaurants in other well-known national chains, including
those offering different types of food and service.
Item 3. Legal Proceedings
On May 11, 1999, four limited partners in several CNL Income Funds served a
derivative and purported class action lawsuit filed April 22, 1999 against the
general partners and APF in the Circuit Court of the Ninth Judicial Circuit of
Orange County, Florida, alleging that the general partners breached their
fiduciary duties and violated provisions of certain of the CNL Income Fund
partnership agreements in connection with the proposed Merger. The plaintiffs
are seeking unspecified damages and equitable relief. On July 8, 1999, the
plaintiffs filed an amended complaint which, in addition to naming three
additional plaintiffs, includes allegations of aiding and abetting and
conspiring to breach fiduciary duties, negligence and breach of duty of good
faith against certain of the defendants and seeks additional
6
<PAGE>
equitable relief. As amended, the caption of the case is Jon Hale, Mary J.
-----------------
Hewitt, Charles A. Hewitt, Gretchen M. Hewitt, Bernard J. Schulte, Edward M. and
- -------------------------------------------------------------------------------
Margaret Berol Trust, and Vicky Berol v. James M. Seneff, Jr., Robert A. Bourne,
- --------------------------------------------------------------------------------
CNL Realty Corporation, and CNL American Properties Fund, Inc., Case No. CIO-99-
- ---------------------------------------------------------------
0003561.
On June 22, 1999, a limited partner of several CNL Income Funds served a
purported class action lawsuit filed April 29, 1999 against the general partners
and APF, Ira Gaines, individually and on behalf of a class of persons similarly
----------------------------------------------------------------------
situated, v. CNL American Properties Fund, Inc., James M. Seneff, Jr., Robert A.
- --------------------------------------------------------------------------------
Bourne, CNL Realty Corporation, CNL Fund Advisors, Inc., CNL Financial
- ----------------------------------------------------------------------
Corporation a/k/a CNL Financial Corp., CNL Financial Services, Inc. and CNL
- ---------------------------------------------------------------------------
Group, Inc., Case NO. CIO-99-3796, in the Circuit Court of the Ninth Judicial
- -----------
Circuit of Orange County, Florida, alleging that the general partners breached
their fiduciary duties and that APF aided and abetted their breach of fiduciary
duties in connection with the proposed Merger. The plaintiff is seeking
unspecified damages and equitable relief.
On September 23, 1999, Judge Lawrence Kirkwood entered an order
consolidating the two cases under the caption In re: CNL Income Funds
-----------------------
Litigation, Case No. 99-3561. Pursuant to this order, the plaintiffs in these
- ----------------------------
cases filed a consolidated and amended complaint on November 8, 1999. On
December 22, 1999, the General Partners and CNL Group, inc. filed motions to
dismiss and motions to strike. On December 28, 1999, APF and CNL Fund Advisors,
Inc. filed motions to dismiss. On March 6, 2000, all of the defendants filed a
Joint Notice of Filing Form 8-K Reports and Suggestion of Mootness.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
(a) As of March 15, 2000 there were 3,048 holders of record of the Units. There
is no public trading market for the Units, and it is not anticipated that a
public market for the Units will develop. During 1999, Limited Partners who
wished to sell their Units may have offered the Units for sale pursuant to the
Partnership's distribution reinvestment plan (the "Plan"), and Limited Partners
who wished to have their distributions used to acquire additional Units (to the
extent Units were available for purchase), may have done so pursuant to such
Plan. The General Partners had the right to prohibit transfers of Units. From
inception through December 31, 1999, the price paid for any Unit transferred
pursuant to the Plan range from $8.67 to $9.50 per Unit. The price paid for any
Unit transferred other than pursuant to the Plan was subject to negotiation by
the purchaser and the selling Limited Partner. The Partnership will not redeem
or repurchase Units.
The following table reflects, for each calendar quarter, the high, low and
average sales prices for transfers of Units during 1999 and 1998 other than
pursuant to the Plan.
<TABLE>
<CAPTION>
1999(1) 1998 (1)
------------------------------------------------ -------------------------------------------
High Low Average High Low Average
------------ ------------ ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter (2) (2) (2) $8.67 $8.40 $8.53
Second Quarter $7.70 $7.70 $7.70 9.50 7.90 8.54
Third Quarter 9.50 7.00 8.17 8.95 8.81 8.85
Fourth Quarter 7.69 7.26 7.48 9.50 8.97 9.16
</TABLE>
(1) A total of 9,750 and 30,350 Units were transferred other than pursuant to
the Plan for the years ended December 31, 1999 and 1998, respectively.
(2) No transfer of Units took place during the quarter other than pursuant to
the Plan.
The capital contribution per Unit was $10. All cash available for
distribution will be distribute to the partners pursuant to the provisions of
the Partnership Agreement.
7
<PAGE>
For each of the years ended December 31, 1999 and 1998, the Partnership
declared cash distributions of $3,400,008 to the Limited Partners.
Distributions of $850,002 were declared at the close of each of the
Partnership's calendar quarters during 1999 and 1998 to the Limited Partners.
These amounts include monthly distributions made in arrears for the Limited
Partners electing to receive such distributions on this basis. No amounts
distributed to partners for the years ended December 31, 1999 and 1998 are
required to be or have been treated by the Partnership as a return of capital
for purposes of calculating the Limited Partners' return on their adjusted
capital contributions. No distributions have been made to the General Partners
to date.
The Partnership intends to continue to make distributions of cash available
for distribution to the Limited Partners on a quarterly basis, although some
Limited Partners, in accordance with their election, receive monthly
distributions for an annual fee.
(b) Not applicable
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31:
Revenues (1) $ 3,719,734 $ 3,482,210 $ 3,832,470 $ 3,795,754 $ 3,956,874
Net income (2) 2,681,165 2,495,855 3,035,627 3,231,815 3,319,174
Cash distributions declared 3,400,008 3,400,008 3,400,008 3,400,008 3,375,011
Net income per Unit (2) 0.66 0.62 0.75 0.80 0.82
Cash distributions declared per Unit 0.85 .85 0.85 0.85 0.84
At December 31:
Total assets $34,337,261 $34,687,493 $35,523,590 $35,945,070 $36,054,757
Partners' capital 33,030,560 33,749,403 34,653,556 35,017,937 35,186,130
</TABLE>
(1) Revenues include equity in earnings of joint ventures and adjustments to
accrued rental income due to the tenant of certain Properties filing for
bankruptcy.
(2) Net income for the year ended December 31, 1999, includes a loss on removal
of building in connection with renovation of $352,285 and a gain on sale of
land and buildings of $176,159. Net income for the year ended December 31,
1998 includes a provision for loss on building of $297,885. Net income for
the year ended December 31, 1997, includes a loss on sale of land and
direct financing lease of $48,538. Net income for the year ended December
31, 1996, includes a gain on sale of land of $82,855.
The above selected financial data should be read in conjunction with the
financial statements and related notes contained in Item 8 hereof.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Partnership was organized on September 25, 1992, to acquire for cash,
either directly or through joint venture arrangements, both newly constructed
and existing restaurant Properties, as well as land upon which restaurant
Properties were to be constructed, which are leased primarily to operators of
selected national and regional fast-food and family-style Restaurant Chains.
The leases are generally triple-net leases, with the lessee generally
responsible for all repairs and maintenance, property taxes, insurance and
utilities. As of December 31, 1999, the Partnership owned 46 Properties, either
directly or through joint venture or tenancy in common arrangements.
8
<PAGE>
Capital Resources
The Partnership's primary source of capital is cash from operations (which
includes cash received from tenants, distributions from joint ventures and
interest received, less cash paid for expenses). Cash from operations was
$3,312,989, $3,277,301, and $3,273,557 for the years ended December 31, 1999,
1998, and 1997, respectively. The increase in cash from operations during 1999,
as compared to 1998, was primarily a result of changes in income and expenses as
described in "Results of Operations" below and changes in the Partnership's
working capital. The increase during 1998, as compared to 1997, was primarily
due to changes in the Partnership's working capital.
Other sources and uses of capital included the following during the years
ended December 31, 1999, 1998, and 1997.
In January 1997, the Partnership reinvested the net sales proceeds received
from the 1996 sale of a Property in Richmond, Virginia in a Property located in
Akron, Ohio, with an affiliate of the General Partners as tenants-in-common. In
connection therewith, the Partnership and the affiliate entered into an
agreement whereby each party will share in the profits and losses of the
Property in proportion to its applicable percentage interest. As of December
31, 1999, the Partnership owned a 63.09% interest in this Property. The sale of
the Property in Richmond, Virginia, and the reinvestment of the net sales
proceeds in a Property in Akron, Ohio, qualified as a like-kind exchange
transaction for federal income tax purposes.
In October 1997, the Partnership sold its Property in Orlando, Florida, to
a third party for $953,371 and received net sales proceeds of $932,849,
resulting in a loss of $48,538 for financial reporting purposes. In December
1997, the Partnership reinvested the net sales proceeds in a Property located in
Miami, Florida, with affiliates of the General Partners as tenants-in-common.
In connection therewith, the Partnership and its affiliates entered into an
agreement whereby each party will share in the profits and losses of the
Property in proportion to its applicable percentage interest. As of December
31, 1999, the Partnership owned a 47.83% interest in this Property.
During the year ended December 31, 1997, the Partnership loaned $196,980 to
the former tenant of the Denny's Property in Orlando, Florida in order to
facilitate the sale of the Property. Upon the sale of the Property in October
1997, the Partnership collected $127,843 of the amounts advanced and wrote off
the balance of $69,137.
In November 1998, the Partnership entered into a new lease for the Property
in Tampa, Florida, with a new tenant to operate the Property as a Steak-n-Shake
restaurant. In connection with the new lease agreement, the Partnership agreed
to renovate the Property; therefore, during the year ended 1999, the old
building located on the Property was removed. As a result, the undepreciated
cost of the building of $352,285 was charged to net income for financial
reporting purposes. As of December 31, 1999, a new building had been
constructed and was operational. In connection with the new lease, the
Partnership funded approximately $537,400 in construction costs for the new
building. The Partnership used a portion of the net sales proceeds from the
sale of the Property in Houston, Texas, to pay such costs, as described below.
In May 1999, the Partnership entered into a new lease for the Property in
Philadelphia, Pennsylvania with the new tenant to operate the Property as an
Arby's restaurant. In connection with the new lease, the Partnership agreed to
pay up to $433,000 in renovation costs relating to this Property, $238,257 of
which had been paid and $194,743 incurred and accrued as of December 31, 1999.
The Partnership intends to use a portion of the net sales proceeds from the sale
of the Property in Houston, Texas, to pay such costs, as described below.
In July 1999, the Partnership sold its Property in Houston, Texas to a
third party for $1,073,887 and received net sales proceeds of $1,059,498,
resulting in a gain of $176,159 for financial reporting purposes. The Property
was originally acquired by the Partnership in August 1993 at a cost of
approximately $861,300, excluding acquisition fees and miscellaneous acquisition
expenses; therefore, the Partnership sold the Property for approximately
$198,200 in excess of its original purchase price. The Partnership has used a
portion of, and intends to use an additional portion of, the net sales proceeds
to pay for the construction and renovation costs described above. The
Partnership distributed amounts sufficient to enable the Limited Partners to pay
federal and state income taxes, if any (at a level reasonably assumed by the
General Partners), resulting from the sale.
None of the Properties owned by the Partnership, or the joint ventures or
tenancy-in-common arrangements in which the Partnership owns an interest is or
may be encumbered. Subject to certain restrictions on borrowing, however, the
Partnership may borrow funds but will not encumber any of the Properties in
connection with any such borrowing.
9
<PAGE>
The Partnership will not borrow for the purpose of returning capital to the
Limited Partners. The Partnership will not borrow under arrangements that would
make the Limited Partners liable to creditors of the Partnership. The General
Partners further have represented that they will use their reasonable efforts to
structure any borrowing so that it will not constitute "acquisition
indebtedness" for federal income tax purposes and also will limit the
Partnership's outstanding indebtedness to three percent of the aggregate
adjusted tax basis of its Properties. Affiliates of the General Partners from
time to time incur certain operating expenses on behalf of the Partnership for
which the Partnership reimburses the affiliates without interest.
Currently, rental income from the Partnership Properties is invested in
money market accounts or other short-term highly liquid investments such as
demand deposit accounts at commercial banks, certificates of deposit and money
market accounts with less than a 30-day maturity date, pending the Partnership's
use of such funds to pay Partnership expenses or to make distributions to
partners. At December 31, 1999, the Partnership had $945,802 invested in such
short-term investments as compared to $766,859 at December 31, 1998. The
increase in cash and cash equivalents during the year ended December 31, 1999,
was primarily the result of the receipt of sales proceeds from the sale of a
Property in Houston, Texas, which the Partnership intends to use to fund during
2000 for the renovation costs relating to the Property in Philadelphia,
Pennsylvania. As of December 31, 1999, the average interest rate earned on the
rental income deposited in demand deposit accounts at commercial banks was
approximately 3.08% annually. The funds remaining at December 31, 1999, will be
used towards the payment of distributions, renovation costs described above and
other liabilities.
Short-Term Liquidity
The Partnership's short-term liquidity requirements consist primarily of
the operating expenses of the Partnership.
The Partnership's investment strategy of acquiring Properties for cash and
generally leasing them under triple-net leases to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses.
The General Partners believe that the leases will continue to generate cash flow
in excess of operating expenses.
Due to low operating expenses and ongoing cash flow, the General Partners
believe that the Partnership has sufficient working capital reserves at this
time. In addition, because all leases of the Partnership's Properties are on a
triple-net basis, it is not anticipated that a permanent reserve for maintenance
and repairs will be established at this time. To the extent, however, that the
Partnership has insufficient funds for such purposes, the General Partners will
contribute to the Partnership an aggregate amount of up to one percent of the
offering proceeds for maintenance and repairs. The General Partners have the
right to cause the Partnership to maintain additional reserves if, in their
discretion, they determine such reserves are required to meet the Partnership's
working capital needs.
The General Partners have the right, but not the obligation, to make
additional capital contributions if they deem it appropriate in connection with
the operations of the Partnership.
The Partnership generally distributes cash from operations remaining after
the payment of the operating expenses of the Partnership, to the extent that the
General Partners determine that such funds are available for distribution.
Based on current and future anticipated cash from operations, the Partnership
declared distributions to the Limited Partners of $3,400,008 for each of the
years ended December 31, 1999, 1998, and 1997. This represents distributions of
$0.85 per Unit for each of the years ended December 31, 1999, 1998 and 1997. No
amounts distributed to the Limited Partners for the years ended December 31,
1999, 1998, and 1997, are required to be or have been treated by the Partnership
as a return of capital for purposes of calculating the Limited Partners' return
on their adjusted capital contributions. The Partnership intends to continue to
make distributions of cash available for distribution to the Limited Partners on
a quarterly basis.
During 1999, 1998, and 1997, affiliates of the General Partners incurred on
behalf of the Partnership $174,509, $101,134, and $87,870, respectively, for
certain operating expenses. As of December 31, 1999 and 1998, the Partnership
owed $69,234 and $22,529, respectively, to related parties for such amounts,
accounting and administrative services and management fees. As of March 15,
2000, the Partnership had reimbursed the affiliates all such amounts. Other
liabilities, including distributions payable, increased to $1,237,467 at
December 31, 1999, from $915,561 at December 31, 1998. The increase in other
liabilities is partially attributable to the Partnership accruing transaction
costs relating to the proposed merger with APF, as described in "Termination of
Merger." The increase in construction costs payable relating to the Property in
Philadelphia, Pennsylvania, as described above in "Capital Resources." Total
liabilities at December 31, 1999, to the extent they exceed cash and cash
equivalents, will be paid from future cash from operations.
10
<PAGE>
Long-Term Liquidity
The Partnership has no long-term debt or other long-term liquidity
requirements.
Results of Operations
During 1997, the Partnership owned and leased 43 wholly owned Properties
(including one Property in Orlando, Florida, which was sold in October 1997),
and during 1999 and 1998, the Partnership owned and leased 42 wholly owned
Properties (including one Property in Houston, Texas, which was sold in July
1999). During 1999, 1998, and 1997, the Partnership was a co-venturer in two
separate joint ventures that each owned and leased one Property. In addition,
during 1999, 1998 and 1997, the Partnership owned and leased three Properties
with affiliates of the General Partners as tenants-in-common. As of December
31, 1999, the Partnership owned, either directly, as tenants-in-common with
affiliates or through joint venture arrangements, 46 Properties which are
generally subject to long-term, triple-net leases. The leases of the Properties
provide for minimum base annual rental amounts (payable in monthly installments)
ranging from approximately $27,400 to $191,900. A majority of the leases
provide for percentage rent based on sales in excess of a specified amount. In
addition, the majority of the leases provide that, commencing in specified lease
years, the annual base rent required under the terms of the lease will increase.
For further description of the Partnership's leases and Properties, see Item 1.
Business - Leases and Item 2. Properties, respectively.
During the years ended December 31, 1999, 1998, and 1997, the Partnership
earned $3,162,395, $2,862,491, and $3,347,609, respectively, in rental income
from operating leases (net of adjustments to accrued rental income) and earned
income from direct financing leases from its wholly owned Properties. The
increase in rental and earned income during 1999, as compared to 1998, was
partially offset by, and the decrease during 1998, as compared to 1997, was
partially attributable to, a decrease of approximately $149,600 and $211,400
during 1999 and 1998, respectively, due to the fact that in June 1998, Long John
Silver's, Inc. filed for bankruptcy and rejected the leases relating to three of
the eight Properties it leased and ceased making rental payments on the three
rejected leases. In conjunction with the three rejected leases, during the year
ended December 31, 1998, the Partnership reversed approximately $307,400 of
accrued rental income that it had previously recorded (non-cash accounting
adjustment relating to the straight-lining of future scheduled rent increases
over the lease term in accordance with generally accepted accounting
principles). No such amounts were reversed during 1999 or 1997. Rental and
earned income increased during 1999 by approximately $195,400 due to the fact
that the Partnership re-leased the three Properties with rejected leases to
three new tenants, as described above in "Capital Resources." In August 1999,
Long John Silver's, Inc. assumed and affirmed its five remaining leases, and the
Partnership has continued receiving rental payments relating to these five
leases.
The increase in rental and earned income during the year ended December 31,
1999, as compared to 1998, was partially offset by a reduction in rental and
earned income of approximately $45,000 as a result of the sale of the Property
in Houston, Texas, as described above in "Capital Resources."
For the years ended December 31, 1999, 1998, and 1997, the Partnership also
earned $273,136, $326,906, and $287,751, respectively, in contingent rental
income. Contingent rental income was higher during the year ended December 31,
1998, due to the fact that actual contingent rental amounts as a received in
1998, relating to 1997 restaurant sales exceeded estimated contingent rental
amounts accrued as receivables at December 31, 1997. Contingent rental income
was also higher during 1998 as the result of the gross sales of four restaurant
Properties meeting the threshold during 1998, under the terms of their leases
requiring payment of contingent rental income.
In addition, for the years ended December 31, 1999, 1998, and 1997, the
Partnership earned $242,158, $243,492, and $150,417, respectively, attributable
to net income earned by joint ventures in which the Partnership is a co-
venturer. The increase in net income earned by these joint ventures during
1998, as compared to 1997, was primarily attributable to the fact that in
December 1997, the Partnership reinvested the net sales proceeds it received
from the sale, in October 1997, of the Property in Orlando, Florida, in a
Property located in Miami, Florida, with affiliates of the General Partners as
tenants-in-common, as described above in "Capital Resources."
During the year ended December 31, 1999, four of the Partnership's lessees,
Flagstar Enterprises, Inc., Long John Silver's, Inc., Golden Corral Corporation,
and Jack in the Box Inc., each contributed more than ten percent of the
Partnership's total rental income (including the Partnership's share of rental
income from two Properties owned by joint ventures and three Properties owned
with affiliates of the General Partners as tenants-in-common). As of December
31, 1999, Flagstar Enterprises, Inc. was the lessee under leases relating to 11
restaurants, Long John Silver's, Inc. was the lessee under leases relating to
five restaurants, (excluding three restaurants for which Long John Silver's,
Inc. rejected the
11
<PAGE>
leases as a result of filing for bankruptcy, as described above), Golden Corral
Corporation was the lessee under leases relating to three restaurants, and Jack
in the Box Inc. was the lessee under leases relating to four restaurants. During
1998, Long John Silver's, Inc. filed for bankruptcy. It is anticipated that
based on the minimum rental payments required by the leases, Flagstar
Enterprises, Inc., Golden Corral Corporation and Jack in the Box Inc. each will
continue to contribute more than ten percent of the Partnership's total rental
income during 2000. In addition, during the year ended December 31, 1999, five
Restaurant Chains, Long John Silver's, Hardee's, Golden Corral, Jack in the Box,
and Burger King, each accounted for more than ten percent of the Partnership's
total rental income (including the Partnership's share of rental income from two
Properties owned by joint ventures and three Properties owned with affiliates of
the General Partners as tenants-in-common). It is anticipated that these five
Restaurant chains each will continue to account for more than ten percent of the
total rental income under the terms of its leases in 2000. Any failure of these
lessees or Restaurant Chains could materially affect the Partnership's income if
the Partnership is not able to re-lease the Properties in a timely manner.
Operating expenses, including depreciation and amortization expense, were
$862,443, $688,470, and $748,305 for the years ended December 31, 1999, 1998,
and 1997, respectively. The increase in operating expenses during 1999, as
compared to 1998, was primarily attributable to, and the decrease during 1998,
as compared to 1997, was partially offset by, the fact that the Partnership
incurred $192,016 and $23,291 during 1999 and 1998, respectively, in transaction
costs related to the General Partners retaining financial and legal advisors to
assist them in evaluating and negotiating the proposed merger with APF, as
described below in "Termination of Merger".
The increase in operating expenses during 1999, as compared to 1998, was
partially offset by a decrease of approximately $24,700 as a result of a
decrease in depreciation expense due to the sale of the Property in Houston,
Texas, as described above.
The decrease in operating expenses during 1998, as compared to 1997, was
partially attributable to the fact that during 1997, the Partnership recorded
bad debt expense of approximately $54,000 for rental amounts due from the former
tenant of the Denny's Property in Orlando, Florida, as a result of the fact that
the former tenant ceased making rental payments. The Partnership ceased
collection efforts on rental amounts not collected from the tenant at the sale
of the Property in October, 1997, as described above in "Capital Resources." In
addition, during 1997 the Partnership recorded bad debt expense of approximately
$69,100 relating to the advances made to the former tenant of the Denny's
Property in Orlando, Florida, that were not recovered from the former tenant, as
described above in "Capital Resources."
In addition, the decrease in operating expenses during 1998, as compared to
1997, was partially offset by an increase in insurance, legal fee expense and
real estate tax expense as a result of Long John Silver's, Inc. filing for
bankruptcy and rejecting the leases relating to three Properties in June 1998.
During 1998, the Partnership entered into two leases, each with a new tenant for
two of the three vacant Properties, to operate the Properties as a Lion's Choice
restaurant and a Steak-n-Shake restaurant, as described above. In accordance
with the lease agreements, the new tenants are responsible for real estate
taxes, insurance and maintenance relating to the Properties; therefore, the
General Partners do not anticipate the Partnership will incur these expenses for
these Properties in the future. In addition, the decrease in operating expenses
during 1998 was partially offset by an increase in depreciation expense due to
the fact that during 1998, the Partnership reclassified the three vacant
Properties from net investment in direct financing leases to land and building
on operating leases.
During 1999, the Partnership entered into a new lease for its Property in
Tampa, Florida, with a Steak-n-Shake operator. In connection with the new
lease, the Partnership agreed to renovate the Property; therefore, the old
building located on the Property was removed. As a result, the Partnership
removed the remaining undepreciated cost of the building from its accounts
resulting in a loss of $352,285 for financial reporting purposes.
In addition, as a result of the sale of the Property in Houston, Texas,
during 1999, as described above in "Capital Resources", the Partnership
recognized a gain of $176,159 for financial reporting purposes.
During the year ended December 31, 1998, the Partnership recorded a
provision for loss on building in the amount of $297,885 for financial purposes
relating to one of the Properties for which Long John Silver's, Inc. rejected
the lease. The allowance represented the difference between the Property's
carrying value at December 31, 1998 and the estimated net realizable value at
December 31, 1998 for the Property. No such allowance was established during
the years ended December 31, 1999 and 1997. In addition, as a result of the
sale of the Property in Orlando, Florida, as described above in "Capital
Resources," the Partnership recognized a loss for financial reporting purposes
of $48,538 for the year ended December 31, 1997. No Properties were sold during
1998.
12
<PAGE>
The Partnership's leases as of December 31, 1999, are generally triple-net
leases and contain provisions that the General Partners believe mitigate the
adverse effect of inflation. Such provisions include clauses requiring the
payment of percentage rent based on certain restaurant sales above a specified
level and/or automatic increases in based rent at specified times during the
term of the lease. Management expects that increases in restaurant sales
volumes due to inflation and real sales growth should result in an increase in
rental income over time. Continued inflation also may cause capital
appreciation of the Partnership's Properties. Inflation and changing prices,
however, also may have an adverse impact on the sales of the restaurants and on
potential capital appreciation of the Properties.
Termination of Merger
On March 11, 1999, the Partnership entered into an Agreement and Plan of
Merger with APF, pursuant to which the Partnership would be merged with and into
a subsidiary of APF. Under the Agreement and Plan of Merger, APF was to issue
shares of its common stock as consideration for the Merger. On March 1, 2000,
the General Partners and APF announced that they had mutually agreed to
terminate the Agreement and Plan of Merger. The agreement to terminate the
Agreement and Plan of Merger was based, in large part, on the General Partners'
concern that, in light of market conditions relating to publicly traded real
estate investment trusts, the value of the transaction had diminished. As a
result of such diminishment, the General Partners' ability to unequivocally
recommend voting for the transaction, in the exercise of their fiduciary duties,
had become questionable.
Overview of Year 2000 Problem
The year 2000 problem concerns the inability of information and non-
information technology systems to properly recognize and process date-sensitive
information beyond January 1, 2000. The failure to accurately recognize the
year 2000 could result in a variety of problems from data miscalculations to the
failure of entire systems.
Status
The Partnership generally does not directly own information technology
systems. The General Partners and their affiliates generally provide all
services requiring the use of information and some non-information technology
systems. In early 1998, affiliates of the General Partners formed a year 2000
committee ("the Y2K Team") that assessed the readiness of any systems that are
date sensitive and completed upgrades for the hardware equipment and software
that was not year 2000 compliant, as necessary. The cost for these upgrades and
other remedial measures is the responsibility of the General Partners and their
affiliates. The General Partners and their affiliates do not expect that the
Partnership will incur any costs in connection with the year 2000 remedial
measures. In addition, the Y2K Team requested and received certifications of
compliance from other companies with which the General Partners, their
affiliates, and the Partnership have material third party relationships.
In assessing the risks presented by the year 2000 problem, the Y2K Team
identified potential worst case scenarios involving the future of the
information and non-information technology systems used by the Partnership's
transfer agent, financial institutions and tenants. As of January 14, 2000, the
General Partners and their affiliates have tested the information and non-
information technology systems used by the Partnership and have not experienced
material disruption or other significant problems. In addition, as of the same
date, the General Partners are not aware of any material year 2000 problems
relating to information and non-information technology systems of third parties
with which the Partnership maintains material relationships, including those of
the Partnership's transfer agent, financial institutions and tenants. In
addition, in the Partnership's interactions with its transfer agent, financial
institutions and tenants, the systems of these third parties have functioned
normally. Until the Partnership's first distribution in 2000 and the delivery
of the information by the transfer agent to stockholders in early 2000, the
General Partners will continue to monitor the year 2000 compliance of the
transfer agent. In addition, the General Partners will continue to monitor the
systems used by the Partnership and to maintain contact with third parties with
which the Partnership has material relationships with respect to year 2000
compliance and any year 2000 issues that may arise at a later date. The General
Partners will develop contingency plans relating to ongoing year 2000 issues at
the time that such issues are identified and such plans are deemed necessary.
Based on the information provided to the Y2K Team, the upgrades and
remedial measures by the General Partners and their affiliates, and the normal
functioning to date of information and non-information technology systems used
by the Partnership and those third parties, the General Partners do not foresee
significant risks associated with its year 2000 compliance at this time. In
addition, the General Partners and their affiliates do not expect to incur any
additional costs in connection with the year 2000 remedial efforts. However,
there can be no assurance that the General
13
<PAGE>
Partners and their affiliates or any third parties will not have ongoing year
2000 issues that may have adverse effects on the Partnership.
Item 7a. Quantitative and Qualitative Disclosures About market Risk
Not applicable
Item 8. Financial Statements and Supplementary Data
14
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
CONTENTS
--------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Certified Public Accountants 16
Financial Statements:
Balance Sheets 17
Statements of Income 18
Statements of Partners' Capital 19
Statements of Cash Flows 20
Notes to Financial Statements 22
</TABLE>
15
<PAGE>
Report of Independent Certified Public Accountants
--------------------------------------------------
To the Partners
CNL Income Fund XIII, Ltd.
In our opinion, the financial statements listed in the index appearing under
item 14(a)(1) present fairly, in all material respects, the financial position
of CNL Income Fund XIII, Ltd. (a Florida limited partnership) at December 31,
1999 and 1998, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1999 in conformity with
accounting principles generally accepted in the United States. In addition, in
our opinion, the financial statement schedules listed in the index appearing
under item 14(a)(2) present fairly, in all material respects, the information
set forth therein when read in conjunction with the related financial
statements. These financial statements and financial statement schedules are
the responsibility of the Partnership's management; our responsibility is to
express an opinion on these financial statements and financial statement
schedules based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Orlando, Florida
February 4, 2000, except for Note 10 for which the date is March 1, 2000
16
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
December 31,
1999 1998
------------- ------------
<S> <C>
ASSETS
------
Land and buildings on operating leases, less
accumulated depreciation and allowance for loss on
building $22,162,826 $22,945,358
Net investment in direct financing leases 7,042,118 6,951,890
Investment in joint ventures 2,445,549 2,451,336
Cash and cash equivalents 945,802 766,859
Receivables, less allowance for doubtful accounts of
$532 in 1998 135,432 121,119
Prepaid expenses 15,963 8,453
Lease costs, less accumulated amortization of $1,789
in 1999 33,961 17,875
Accrued rental income 1,555,610 1,424,603
------------- ------------
$34,337,261 $34,687,493
============= ============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Accounts payable $ 144,227 $ 4,068
Accrued construction costs 194,743 --
Accrued and escrowed real estate taxes payable 2,176 6,923
Distributions payable 850,002 850,002
Due to related parties 69,234 22,529
Rents paid in advance and deposits 46,319 54,568
------------- ------------
Total liabilities 1,306,701 938,090
Partners' capital 33,030,560 33,749,403
------------- ------------
$34,337,261 $34,687,493
============= ============
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF INCOME
--------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
------------ ----------- ------------
<S> <C> <C> <C>
Revenues
Rental income from operating leases $ 2,367,931 $ 2,404,934 $ 2,371,062
Adjustments to accrued rental income -- (307,405) --
Earned income from direct financing leases 794,464 764,962 976,547
Contingent rental income 273,136 326,906 287,751
Interest and other income 42,045 49,321 46,693
------------ ----------- ------------
3,477,576 3,238,718 3,682,053
------------ ----------- ------------
Expenses:
General operating and administrative 152,089 150,239 152,918
Bad debt expense -- -- 123,071
Professional services 51,773 26,869 25,595
Management fees to related parties 36,152 35,257 34,321
Real estate taxes 7,877 13,989 --
State and other taxes 23,362 16,172 18,301
Depreciation and amortization 399,174 422,653 394,099
Transaction costs 192,016 23,291 --
------------ ----------- ------------
862,443 688,470 748,305
------------ ----------- ------------
Income Before Equity in Earnings of Joint Ventures, Gain (Loss)
on Sale of Land , Buildings and Investment in Direct Financing
Lease, Loss on Removal of Building in Connection with Renovation
and Provision for Loss on Building 2,615,133 2,550,248 2,933,748
Equity in Earnings of Joint Ventures 242,158 243,492 150,417
Gain (Loss) on Sale of Land, Buildings, and Investment in Direct
Financing Lease 176,159 -- (48,538)
Loss on Removal of Building in Connection with Renovation (352,285) -- --
Provision for Loss on Building -- (297,885) --
------------ ----------- ------------
Net Income $ 2,681,165 $ 2,495,855 $ 3,035,627
============ =========== ============
Allocation of Net Income:
General partners $ 28,060 $ 26,667 $ 30,690
Limited partners 2,653,105 2,469,188 3,004,937
------------ ----------- ------------
$ 2,681,165 $ 2,495,855 $ 3,035,627
============ =========== ============
Net Income Per Limited Partner Unit $ 0.66 $ 0.62 $ 0.75
============ =========== ============
Weighted Average Number of Limited Partner Units Outstanding 4,000,000 4,000,000 4,000,000
============ =========== ============
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
-------------------------------
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
General Partners Limited Partners
-------------------------- ------------------------------------------------------------------------
Accumulated Accumulated Syndication
Contributions Earnings Contributions Distributions Earnings Costs Total
------------- ----------- ------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $1,000 $105,517 $40,000,000 $(10,928,392) $10,504,981 $(4,665,169) $35,017,937
Distributions to limited
partners ($0.85 per limited
partner unit) -- -- -- (3,400,008) -- -- (3,400,008)
Net Income -- 30,690 -- -- 3,004,937 -- 3,035,627
------------- ----------- ------------- ------------- ------------ ------------ ------------
Balance, December 31, 1997 1,000 136,207 40,000,000 (14,328,400) 13,509,918 (4,665,169) 34,653,556
Distributions to limited
partners ($0.85 per limited
partner unit) -- -- -- (3,400,008) -- -- (3,400,008)
Net income -- 26,667 -- -- 2,469,188 -- 2,495,855
------------- ----------- ------------- ------------- ------------ ------------ ------------
Balance, December 31, 1998 1,000 162,874 40,000,000 (17,728,408) 15,979,106 (4,665,169) 33,749,403
Distributions to limited
partners ($0.85 per
limited partner unit) -- -- -- (3,400,008) -- -- (3,400,008)
Net income -- 28,060 -- -- 2,653,105 -- 2,681,165
------------- ----------- ------------- ------------- ------------ ------------ ------------
Balance, December 31, 1999 $1,000 $190,934 $40,000,000 $(21,128,416) $18,632,211 $(4,665,169) $33,030,560
============= =========== ============= ============= ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
19
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Increase (Decrease) in Cash and Cash
Equivalents:
Cash Flows from Operating Activities:
Cash received from tenants $ 3,342,666 $ 3,235,985 $ 3,329,633
Distributions from joint ventures 247,710 250,270 151,322
Cash paid for expenses (314,517) (245,273) (236,793)
Interest received 37,130 36,319 29,395
----------- ----------- -----------
Net cash provided by operating
activities 3,312,989 3,277,301 3,273,557
----------- ----------- -----------
Cash Flows from Investing Activities:
Proceeds from sale of land and building 1,059,498 -- 932,849
Additions to land and buildings (238,257) -- --
Investment in direct financing leases (537,404) -- --
Investment in joint ventures -- (539) (1,482,849)
Advances to tenant -- -- (196,980)
Repayment of advances -- -- 127,843
Payment of lease costs (17,875) (17,875) --
Decrease in restricted cash -- -- 550,000
----------- ----------- -----------
Net cash provided by (used in)
investing activities 265,962 (18,414) (69,137)
----------- ----------- -----------
Cash Flows from Financing Activities:
Distributions to limited partners (3,400,008) (3,400,008) (3,400,008)
----------- ----------- -----------
Net cash used in financing activities (3,400,008) (3,400,008) (3,400,008)
----------- ----------- -----------
Net Increase (decrease) in Cash and Cash
Equivalents 178,943 (141,121) (195,588)
Cash and Cash Equivalents at Beginning of
Year 766,859 907,980 1,103,568
----------- ----------- -----------
Cash and Cash Equivalents at End of Year $ 945,802 $ 766,859 $ 907,980
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
20
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
STATEMENT OF CASH FLOWS - CONTINUED
-----------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Reconciliation of Net Income to Net Cash
Provided by Operating Activities
Net income $2,681,165 $2,495,855 $3,035,627
---------- ---------- ----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 397,150 421,840 391,434
Amortization 2,024 637 2,665
Equity in earnings of joint ventures,
net of distributions 5,552 6,954 905
Loss on removal of building in
connection with renovation 352,285 -- --
Loss (gain) on sale of land and
buildings (176,159) -- 48,538
Provision for loss on building -- 297,885 --
Bad debt expense -- -- 123,071
Decrease (increase) in receivables (10,493) (97,173) 23,845
Decrease in net investment in direct
financing leases 90,732 82,115 84,646
Decrease (increase) in prepaid expenses (7,510) 1,915 (1,225)
Increase in accrued rental income (195,625) (783) (378,850)
Increase (decrease) in accounts payable
and accrued expenses 135,412 3,320 (12,761)
Increase in due to related parties 46,705 15,738 4,197
Increase (decrease) in rents paid in
advance and deposits (8,249) 48,998 (48,535)
---------- ---------- ----------
Total adjustments 631,824 781,446 237,930
---------- ---------- ----------
Net Cash Provided by Operating Activities $3,312,989 $3,277,301 $3,273,557
========== ========== ==========
Supplemental Schedule of Non-Cash
Financing Activities:
Distributions declared and unpaid at
December 31 $ 850,002 $ 850,002 $ 850,002
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998 and 1997
1. Significant Accounting Policies:
-------------------------------
Organization and Nature of Business - CNL Income Fund XIII, Ltd. (the
-----------------------------------
"Partnership") is a Florida limited partnership that was organized for the
purpose of acquiring both newly constructed and existing restaurant
properties, as well as properties upon which restaurants were to be
constructed, which are leased primarily to operators of national and
regional fast-food and family-style restaurant chains.
The general partners of the Partnership are CNL Realty Corporation (the
"Corporate General Partner"), James M. Seneff, Jr. and Robert A. Bourne.
Mr. Seneff and Mr. Borne are also 50 percent shareholders of the Corporate
General Partner. The general partners have responsibility for managing the
day-to-day operations of the Partnership.
Real Estate and Lease Accounting - The Partnership records the acquisition
--------------------------------
of land and buildings at cost, including acquisition and closing costs.
Land and buildings are leased to unrelated third parties generally on a
triple-net basis, whereby the tenant is responsible for all operating
expenses relating to the property, including property taxes, insurance,
maintenance and repairs. The leases are accounted for using either the
direct financing or the operating methods. Such methods are described
below:
Direct financing method - The leases accounted for using the direct
financing method are recorded at their net investment (which at the
inception of the lease generally represents the cost of the asset)
(Note 4). Unearned income is deferred and amortized to income over
the lease terms so as to produce a constant periodical rate of return
on the Partnership's net investment in the leases.
Operating method - Land and building leases accounted for using the
operating method are recorded at cost, revenue is recognized as
rentals are earned and depreciation is charged to operations as
incurred. Buildings are depreciated on the straight-line method over
their estimated useful lives of 30 years. When scheduled rentals vary
during the lease term, income is recognized on a straight-line basis
so as to produce a constant periodic rent over the lease term
commencing on the date the property is placed in service.
22
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
1. Significant Accounting Policies - Continued:
-------------------------------------------
Accrued rental income represents the aggregate amount of income recognized
on a straight-line basis in excess of scheduled rental payments to date.
Whenever a tenant defaults under the terms of its lease, or events or
changes in circumstance indicate that the tenant will not lease the
property through the end of the lease term, the Partnership either reserves
or reverses the cumulative accrued rental income balance.
When the properties are sold, the related cost and accumulated depreciation
for operating leases and the net investment for direct financing leases,
plus any accrued rental income, are removed from the accounts and gains or
losses from sales are reflected in income. The general partners of the
Partnership review properties for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be
recoverable through operations. The general partners determine whether an
impairment in value has occurred by comparing the estimated future
undiscounted cash flows, including the residual value of the property, with
the carrying cost of the individual property. If an impairment is
indicated, the assets are adjusted to their fair value. Although the
general partners have made their best estimate of these factors based on
current conditions, it is reasonably possible that changes could occur in
the near term which could adversely affect the general partners' best
estimate of net cash flows expected to be generated from its properties and
the need for asset impairment write downs.
When the collection of amounts recorded as rental or other income is
considered to be doubtful, an adjustment is made to increase the allowance
for doubtful accounts, which is netted against receivables, and to decrease
rental or other income or increase bad debt expense for the current period,
although the Partnership continues to pursue collection of such amounts.
if amounts are subsequently determined to be uncollectible, the
corresponding receivable and allowance for doubtful accounts are decreased
accordingly.
Investment in Joint Ventures - The Partnership accounts for its interests
-----------------------------
in Attalla Joint Venture and Salem Joint Venture, and a property in Arvada,
Colorado, a property in Akron, Ohio, and a property in Miami, Florida, for
which each property is held as tenants-in-common with affiliates, using the
equity method since the Partnership shares control with affiliates which
have the same general partners.
23
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
1. Significant Accounting Policies - Continued:
-------------------------------------------
Cash and Cash Equivalents - The Partnership considers all highly liquid
-------------------------
investments with a maturity of three months or less when purchased to be
cash equivalents. Cash and cash equivalents consist of demand deposits at
commercial banks and money market funds (some of which are backed by
government securities). Cash equivalents are stated at cost plus accrued
interest, which approximates market value.
Cash accounts maintained on behalf of the Partnership in demand deposits at
commercial banks and money market funds may exceed federally insured
levels; however, the Partnership has not experienced any losses in such
accounts. The Partnership limits investment of temporary cash investments
to financial institutions with high credit standing; therefore, the
Partnership believes it is not exposed to any significant credit risk on
cash and cash equivalents.
Lease Costs - Lease incentive costs and brokerage and legal fees associated
-----------
with negotiating new leases are amortized over the term of the new lease
using the straight-line method.
Income Taxes - Under Section 701 of the Internal Revenue Code, all income,
------------
expenses and tax credit items flow through to the partners for tax
purposes. Therefore, no provision for federal income taxes is provided in
the accompanying financial statements. The Partnership is subject to
certain state taxes on its income and property.
Additionally, for tax purposes, syndication costs are included in
partnership equity and in the basis of each partner's investment. For
financial reporting purposes, syndication costs are netted against
partners' capital and represent a reduction of Partnership equity and a
reduction in the basis of each partner's investment.
Use of Estimates - The general partners of the Partnership have made a
-----------------
number of estimates and assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent assets and liabilities to
prepare these financial statements in conformity with generally accepted
accounting principles. The more significant areas requiring the use of
management estimates relate to the allowance for doubtful accounts and
future cash flows associated with long-lived assets. Actual results could
differ from those estimates.
2. Leases:
------
The Partnership leases its land or land and buildings to operators of
national and regional fast-food and family-style restaurants. The leases
are accounted for under the provisions of Statement of Financial Accounting
Standards No. 13, "Accounting for Leases." Some of the
24
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
2. Leases - Continued:
------------------
leases are classified as operating leases and some of the leases have been
classified as direct financing leases. For the leases classified as direct
financing leases, the building portions of the property leases are
accounted for as direct financing leases while the land portions of the
majority of these leases are operating leases. Substantially all leases are
for 15 to 20 years and provide for minimum and contingent rentals. In
addition, the tenant pays all property taxes and assessments, fully
maintains the interior and exterior of the building and carries insurance
coverage for public liability, property damage, fire and extended coverage.
The lease options generally allow tenants to renew the leases for two to
five successive five-year periods subject to the same terms and conditions
as the initial lease. Most leases also allow the tenant to purchase the
property at fair market value after a specified portion of the lease has
elapsed.
3. Land and Buildings on Operating Leases:
--------------------------------------
Land and buildings on operating leases consisted of the following at
December 31:
<TABLE>
<CAPTION>
1999 1998
------------------ -----------------
<S> <C> <C>
Land $12,374,488 $12,742,897
Buildings 12,037,209 12,607,970
------------------ -----------------
24,411,697 25,350,867
Less accumulated depreciation (2,383,986) (2,107,624)
------------------ -----------------
22,027,711 23,243,243
Construction in progress 433,000 --
------------------ -----------------
22,460,711 23,243,243
Less allowance for loss on building (297,885) (297,885)
------------------ -----------------
$22,162,826 $22,945,358
================== =================
</TABLE>
25
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
3. Land and Buildings on Operating Leases - Continued:
---------------------------------------------------
At December 31, 1998, the Partnership established an allowance for loss on
building of $297,885 relating to one property in Philadelphia,
Pennsylvania. The tenant of this property filed for bankruptcy and ceased
payment of rents under the terms of its lease agreement. The allowance
represented the difference between the carrying value of the property at
December 31, 1998, and the estimated net realizable value for this
property.
In November 1998, the Partnership entered into a new lease for the property
in Tampa, Florida with a new tenant to operate the property as a Steak-n-
Shake restaurant. In connection with the new lease agreement, the
Partnership agreed to renovate the property. In connection with such
renovation, during 1999, the old building located on the property was
removed. As a result, the undepreciated cost of the old building was
removed from the Partnership's accounts resulting in a loss of $352,285 for
financial reporting purposes. As of December 31, 1999, the new building
had been constructed and was operational. The building portion of the new
lease is classified as a direct financing lease (see Note 4).
In May 1999, the Partnership entered into a new lease for the property in
Philadelphia, Pennsylvania, with a new tenant to operate the property as an
Arby's restaurant. In connection therewith, the Partnership agreed to fund
up to $433,000 in renovation costs, of which $238,257 had been paid as of
December 31, 1999.
In July 1999, the Partnership sold its property in Houston, Texas to a
third party for $1,073,887 and received net sales proceeds of $1,059,498,
resulting in a gain of $176,159 for financial reporting purposes. This
property was originally acquired by the Partnership in August 1993 and had
a cost of approximately $861,300, excluding acquisition fees and
miscellaneous acquisition expenses; therefore, the Partnership sold the
property for approximately $198,200 in excess of its original purchase
price.
Generally, the leases provide for escalating guaranteed minimum rents
throughout the lease term. Income from these scheduled rent increases is
recognized on a straight-line basis over the terms of the leases. For the
years ended December 31, 1999, 1998, and 1997, the Partnership recognized
$195,625, $783 (net of $307,405 in reversals), and $378,850, respectively,
of such rental income.
26
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
3. Land and Buildings on Operating Leases - Continued:
---------------------------------------------------
The following is a schedule of the future minimum lease payments to be
received on noncancellable operating leases at December 31, 1999:
2000 $ 2,268,218
2001 2,279,413
2002 2,309,419
2003 2,341,576
2004 2,436,906
Thereafter 19,669,401
------------
$31,304,933
============
Since lease renewal periods are exercisable at the option of the tenant,
the above table only presents future minimum lease payments due during the
initial lease terms. in addition, this table does not include any amounts
for future contingent rentals which may be received on the leases based on
a percentage of the tenant's gross sales.
4. Net Investment in Direct Financing Leases:
-----------------------------------------
The following lists the components of the net investment in direct
financing leases at December 31:
1999 1998
----------- -----------
Minimum lease payments receivable
$13,431,946 $13,789,643
Estimated residual values 2,462,765 2,344,575
Less unearned income (8,852,593) (9,182,328)
----------- -----------
Net investment in direct financing
leases $ 7,042,118 $ 6,951,890
=========== ===========
In June 1998, three of the Partnership's leases with Long John Silver's,
Inc., were rejected in connection with the tenant filing for bankruptcy.
As a result, the Partnership reclassified these assets from net investment
in direct financing leases to land and buildings on operating leases. In
accordance with Statement of Financial Accounting Standards No. 13,
"Accounting for Leases", the Partnership recorded the reclassified assets
at the lower of original cost, present fair value, or present carrying
value. No loss on termination of direct financing leases was
27
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
4. Net Investment in Direct Financing Leases- Continued:
----------------------------------------------------
recorded for financial reporting purposes. In October 1998, the
Partnership entered into a new lease with a new tenant for the property in
Overland Park, Kansas, to operate the property as a Lion's Choice
restaurant. In addition, in November 1998, the Partnership entered into a
new lease with a new tenant for the property in Tampa, Florida, to operate
the restaurant as a Steak-n-Shake. In connection with this new lease,
during 1999, the Partnership funded approximately $537,400 in construction
costs for the new building. In accordance with the Statement of Financial
Accounting Standards No. 13, "Accounting for Leases", the Partnership
recorded the building portion of these properties as net investment in
direct financing lease (see Note 3).
The following is a schedule of future minimum lease payments to be
received on direct financing leases at December 31, 1999:
2000 $ 877,792
2001 890,531
2002 908,366
2003 908,908
2004 914,871
Thereafter 8,931,478
-----------
$13,431,946
===========
The above table does not include future minimum lease payments for renewal
periods or for contingent rental payments that may become due in future
periods (see Note 3).
5. Investment in Joint Ventures:
----------------------------
The Partnership has a 50 percent and a 27.8% interest in the profits and
losses of Attalla Joint Venture and Salem Joint Venture, respectively. The
remaining interests in these joint ventures are held by affiliates of the
Partnership which have the same general partners.
The Partnership also owns properties in Arvada, Colorado, Akron, Ohio; and
Miami, Florida, each as tenants-in-common with affiliates of the general
partners. As of December 31, 1999, the Partnership owned a 66.13%, 63.09%
and 47.83% interest, respectively, in the properties.
Attalla Joint Venture, Salem Joint Venture and the Partnership and
affiliates, as tenants-in-common in three separate tenancy-in-common
arrangements, each own and lease one property to an operator of national
fast-food or family-style restaurants.
28
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
5. Investment in Joint Ventures - Continued:
----------------------------------------
The following presents the combined, condensed financial information for
the joint ventures and the properties held as tenants-in-common with
affiliates at December 31:
<TABLE>
<CAPTION>
1999 1998
----------------- -------------------
<S> <C> <C>
Land and buildings on operating leases, less
accumulated depreciation $4,092,068 $4,174,420
Net investment in direct financing lease 356,513 360,790
Cash 18,620 19,083
Receivables 16,553 546
Prepaid expenses 1,254 454
Accrued rental income 256,070 182,217
Liabilities 17,370 16,028
Partners' capital 4,723,708 4,721,482
Revenues 567,352 569,719
Net income 474,195 476,700
</TABLE>
The Partnership recognized income totaling $242,158, $243,492, and $150,417
for the years ended December 31, 1999, 1998, and 1997, respectively, from
these joint ventures and the properties held as tenants-in-common with
affiliates.
6. Allocations and Distributions:
-----------------------------
Generally, all net income and net losses of the Partnership, excluding
gains and losses from the sale of properties, are allocated 99 percent to
the limited partners and one percent to the general partners.
Distributions of net cash flow are made 99 percent to the limited partners
and one percent to the general partners; provided, however, that the one
percent of net cash flow to be distributed to the general partners is
subordinated to receipt by the limited partners of an aggregate, ten
percent, cumulative, noncompounded annual return on their invested capital
contributions (the "Limited Partners' 10% Return").
Generally, net sales proceeds from the sales of properties not in
liquidation of the Partnership to the extent distributed, will be
distributed first to the limited partners in an amount sufficient to
provide them with their Limited Partners' 10% Return, plus the return of
their adjusted capital contributions. The general partners will then
receive, to the extent previously subordinated and unpaid, a one percent
interest in all prior distributions of net cash flow and a return of their
capital contributions. Any remaining sales proceeds will be distributed 95
percent to the limited partners and five percent to the general partners.
29
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
6. Allocations and Distributions - Continued:
-----------------------------------------
Any gain from a sale of a property not in liquidation of the Partnership
is, in general, allocated in the same manner as net sales proceeds are
distributable. Any loss from the sale of a property is, in general,
allocated first, on a pro rata basis, to partners with positive balances in
their capital accounts, and thereafter, 95 percent to the limited partners
and five percent to the general partners.
Generally, net sales proceeds from a sale of properties, in liquidation of
the Partnership will be used in the following order: (i) first to pay and
discharge all of the Partnership's liabilities to creditors, (ii) second,
to establish reserves that may be deemed necessary for any anticipated or
unforeseen liabilities or obligations of the Partnership, (iii) third, to
pay all of the Partnership's liabilities, if any, to the general and
limited partners, (iv) fourth, after allocations of net income, gains
and/or losses, to the partners with positive capital account balances, in
proportion to such balances, up to amounts sufficient to reduce such
positive balances to zero, and (v) thereafter, any funds remaining shall
then be distributed 95 percent to the limited partners and five percent to
the general partners.
During each of the years ended December 31, 1999, 1998, and 1997, the
Partnership declared distributions to the limited partners of $3,400,008.
No distributions have been made to the general partners to date.
30
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
7. Income Taxes:
------------
The following is a reconciliation of net income for financial reporting
purposes to net income for federal income tax purposes for the years ended
December 31:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net income for financial reporting purposes $2,681,165 $2,495,855 $3,035,627
Depreciation for tax reporting purposes in excess of
depreciation for financial reporting purposes (76,982) (59,127) (100,696)
Direct financing leases recorded as operating leases for tax
reporting purposes 90,732 82,115 84,646
Capitalization of transaction costs for tax reporting purposes 192,016 23,291 --
Equity in earning of joint ventures for tax reporting purposes
in excess of (less than) equity in earnings of joint ventures
for financial reporting purposes (25,801) (27,118) (19,727)
Gain on sale of property for financial reporting purposes
deferred for tax reporting purposes 36,702 -- --
Loss on sale of property for financial reporting purposes in
excess of loss for tax reporting purposes 352,285 -- 38,823
Allowance for loss on building -- 297,885 --
Allowance for doubtful accounts (532) 532 (150,734)
Accrued rental income (195,625) (783) (378,850)
Rents paid in advance (8,249) 38,165 (48,535)
---------- ---------- ----------
Net income for federal income tax purposes $3,045,711 $2,850,815 $2,460,554
========== ========== ==========
</TABLE>
31
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
8. Related Party Transactions:
--------------------------
One of the individual general partners, James M. Seneff, Jr., is one of the
principal shareholders of CNL Holdings, Inc. The other individual general
partner, Robert A. Bourne, serves as President and Treasurer of CNL
Financial Group, Inc., a wholly owned subsidiary of CNL Holdings, Inc., CNL
Fund Advisors, Inc. (the "Advisor") was a majority owned subsidiary of CNL
Financial Group, Inc. until it merged with CNL American Properties Fund,
Inc. ("APF"), effective September 1, 1999. The individual general partners
are stockholders and directors of APF.
The Advisor provides certain services relating to management of the
Partnership and its properties pursuant to a management agreement with the
Partnership. In connection therewith, the Partnership agreed to pay the
Advisor a management fee of one percent of the sum of gross revenues from
properties wholly owned by the Partnership and the Partnership's allocable
share of gross revenues from joint ventures. The management fee, which
will not exceed fees which are competitive for similar services in the same
geographic area, may or may not be taken, in whole or in part as to any
year, in the sole discretion of the Advisor. All or any portion of the
management fee not taken as to any fiscal year shall be deferred without
interest and may be taken in such other fiscal year as the Advisor shall
determine. The Partnership incurred management fees of $36,152, $35,257,
and $34,321 for the years ended December 31, 1999, 1998, and 1997,
respectively.
The Advisor are also entitled to receive a deferred, subordinated real
estate disposition fee, payable upon the sale of one or more properties,
based on the lesser of one-half of a competitive real estate commission or
three percent of the sales price if the Advisor provides a substantial
amount of services in connection with the sale. However, if the net sales
proceeds are reinvested in a replacement property, no such real estate
disposition fees will be incurred until such replacement property is sold
and the net sales proceeds are distributed. The payment of the real estate
disposition fee is subordinated to the receipt by the limited partners of
their aggregate Limited Partners' 10% Return plus their invested capital
contributions. No deferred, subordinated real estate disposition fees have
been incurred since inception.
32
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
8. Related Party Transactions - Continued:
--------------------------------------
During the years ended December 31, 1999, 1998, and 1997, the Advisor and
its affiliates provided accounting and administrative services to the
Partnership on a day-to-day basis including services relating to the
proposed and terminated merger as described in Note 10. For the years
ended December 31, 1999, 1998, and 1997, the expenses incurred for these
services were $121,160, $98,719, and $87,322, respectively.
The due to related parties at December 31, 1999 and 1998, totaled $69,234
and $22,529, respectively.
9. Concentration of Credit Risk:
----------------------------
The following schedule presents total rental and earned income from
individual lessees, each representing more than ten percent of the
Partnership's total rental and earned income (including the Partnership's
share of total rental and earned income from joint ventures and the
properties held as tenants-in-common with affiliates of the general
partners) for each of the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
Flagstar Enterprises, Inc. $647,065 $649,525 $744,199
Golden Corral Corp. 530,686 542,900 536,886
Long John Silver's, Inc. 423,498 571,066 759,064
Jack in the Box Inc. (formerly
Foodmaker, Inc.) 413,069 458,690 450,816
</TABLE>
In addition, the following schedule presents total rental and earned income
from individual restaurant chains, each representing more than ten percent
of the Partnership's total rental and earned income (including the
Partnership's share of total rental and earned income from joint ventures
and the properties held as tenants-in-common with affiliates of the general
partners) for each of the years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Hardee's $647,065 $649,525 $649,762
Golden Corral Family Steakhouse Restaurants
530,686 542,900 536,886
Burger King 465,469 497,670 484,111
Long John Silver's 423,498 571,066 759,064
Jack in the Box 413,069 458,690 450,816
</TABLE>
33
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Years Ended December 31, 1999, 1998, and 1997
9. Concentration of Credit Risk-Continued:
--------------------------------------
Although the Partnership's properties are geographically diverse throughout
the United States and the Partnership's lessees operate a variety of
restaurant concepts, default by and lessee or restaurant chain contributing
more than ten percent of the Partnership's revenues could significantly
impact the results of operations of the Partnership if the Partnership is
not able to re-lease the properties n a timely manner.
In June 1998, Long John Silver's, Inc. filed for bankruptcy and rejected
the leases relating to three of its eight leases and ceased making rental
payments to the Partnership on the rejected leases. During 1999, the
Partnership re-leased the three Properties with rejected leases to three
new tenants. In addition, in August 1999, Long John Silver's, Inc. assumed
and affirmed its five remaining leases, and the Partnership has continued
receiving rental payments relating to these five leases.
10. Termination of Merger:
---------------------
On March 11, 1999, the Partnership entered into an Agreement and Plan
of Merger with APF, pursuant to which the Partnership would be merged with
and into a subsidiary of APF. Under the Agreement and Plan of Merger, APF
was to issue shares of its common stock as consideration for the Merger. On
March 1, 2000, the General Partners and APF announced that they had
mutually agreed to terminate the Agreement and Plan of Merger. The
agreement to terminate the Agreement and Plan of Merger was based, in large
part, on the General Partners' concern that, in light of market conditions
relating to publicly traded real estate investment trusts, the value of the
transaction had diminished. As a result of such diminishment, the General
Partners' ability to unequivocally recommend voting for the transaction, in
the exercise of their fiduciary duties, had become questionable. In May
1999, the Partnership entered into a new lease for the property in
Philadelphia, Pennsylvania, with a new tenant to operate the property as an
Arby's restaurant. In connection therewith, the Partnership agreed to pay
up to $433,000 in renovation costs, $194,743 of which have been incurred
and accrued as of December 31, 1999.
34
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
None
PART III
Item 10. Directors and Executive Officers of the Registrant
The General Partners of the Registrant are James M. Seneff, Jr., Robert A.
Bourne and CNL Realty Corporation, a Florida corporation. The General Partners
manage and control the Partnership's affairs and have general responsibility and
the ultimate authority in all matters affecting the Partnership's business. The
Partnership has available to it the services, personnel and experience of CNL
Fund Advisors, Inc., CNL Financial Group, Inc. and their affiliates, all of
which are affiliates of the General Partners.
James M. Seneff, Jr., age 53, Since 1971, Mr. Seneff has been active in
the acquisition, development, and management of real estate projects and,
directly or through an affiliated entity, has served as a general partner or co-
venturer in over 100 real estate ventures. These ventures have involved the
financing, acquisition, construction, and leasing of restaurants, office
buildings, apartment complexes, hotels, and other real estate. Mr. Seneff is a
principal stockholder of CNL Holdings, Inc., the parent company of CNL Financial
Group, Inc. (formerly CNL Group, Inc.), a diversified real estate company, and
has served as a director, Chairman of the Board and Chief Executive Officer of
CNL Financial Group, Inc. since its formation in 1980. Mr. Seneff has served as
a director and Chairman of the Board since inception in 1994, and served as
Chief Executive Officer from 1994 through August 1999, of CNL American
Properties Fund, Inc., a public, unlisted real estate investment trust. He also
served as a director, Chairman of the Board and Chief Executive Officer of CNL
Fund Advisors, Inc., the advisor to CNL American Properties Fund, Inc. until it
merged with the company in September 1999. In addition, he serves as a
director, Chairman of the Board and Chief Executive Officer of CNL Health Care
Properties, Inc., as well as CNL Health Care Corp., the advisor to the company.
He also serves as director, Chairman of the Board and Chief Executive Officer of
CNL Hospitality Properties, Inc., a public, unlisted real estate investment
trust, as well as CNL Hospitality Corp., its advisor. Since 1992, Mr. Seneff
has served as Chairman of the Board and Chief Executive Officer of Commercial
Net Lease Realty, Inc., a public real estate investment trust that is listed on
the New York Stock Exchange. Mr. Seneff has also served as a director, Chairman
of the Board and Chief Executive Officer of the following affiliated companies
since formation: CNL Securities Corp., since 1979; CNL Investment Company, since
1990; and CNL Institutional Advisors, a registered investment advisor for
pension plans, since 1990. Mr. Seneff formerly served as a director of First
Union National Bank of Florida, N.A., and currently serves as the Chairman of
the Board of CNLBank. Mr. Seneff served on the Florida State Commission on
Ethics and is a former member and past Chairman of the State of Florida
Investment Advisory Council, which recommends to the Florida Board of
Administration investments for various Florida employee retirement funds. The
Florida Board of Administration is Florida's principal investment advisory and
money management agency and oversees the investment of more than $60 billion of
retirement funds. Mr. Seneff received his degree in Business Administration
from Florida State University in 1968.
Robert A. Bourne, age 52, Since joining CNL Securities Corp. in 1979, Mr.
Bourne has participated as a general partner or co-venturer in over 100 real
estate ventures involved in the financing, acquisition, construction, and
leasing of restaurants, office buildings, apartment complexes, hotels, and other
real estate. Mr. Bourne is the President and Treasurer of CNL Financial Group,
Inc. (formerly CNL Group, Inc.). Mr. Bourne has served as a director since
inception in 1994, President from 1994 through February 1999, Treasurer from
February 1999 through August 1999, and Vice Chairman of the Board since February
1999 of CNL American Properties Fund, Inc., a public, unlisted real estate
investment trust. He also served in the following positions for CNL Fund
Advisors, Inc., the advisor to CNL American Properties Fund, Inc. prior to its
merger with CNL American Properties Fund, Inc.: director from 1994 through
August 1999, Treasurer from July 1998 through August 1999, President from 1994
through September 1997, and Vice Chairman of the Board from September 1997
through August 1999. Mr. Bourne is a director and President of CNL Health Care
Properties, Inc., as well as a director and President of CNL Health Care Corp.,
the advisor to the company. He is also a director, Vice Chairman of the Board
and President of CNL Hospitality Properties, Inc., a public, unlisted real
estate investment trust, as well as CNL Hospitality Corp., its advisor. Mr.
Bourne also serves as a director of CNLBank. He has served as a director since
1992, Vice Chairman of the Board since February 1996, Secretary and Treasurer
from February 1996 through 1997, and President from July 1992 through February
1996, of Commercial Net Lease Realty Inc., a public real estate investment trust
listed on the New York Stock Exchange. Mr. Bourne holds the following positions
for these affiliates of
35
<PAGE>
CNL Financial Group, Inc.: director, President and Treasurer of CNL Investment
Company; director, President, Treasurer, and Registered Principal of CNL
Securities Corp., a subsidiary of CNL Investment Company and director,
President, Treasurer, and Chief Investment Officer of CNL Institutional
Advisors, Inc., a registered investment advisor for pension plans. Mr. Bourne
began his career as a certified public accountant employed by Coopers & Lybrand,
Certified Public Accountants, from 1971 through 1978, where he attained the
position of tax manager in 1975. Mr. Bourne graduated from Florida State
University in 1970 where he received a B.A. in Accounting, with honors.
CNL Realty Corporation is a corporation organized on November 26, 1985,
under the laws of the State of Florida. Its sole directors and shareholders are
James M. Seneff, Jr. and Robert A. Bourne, the individual General Partners. CNL
Realty Corporation was organized to serve as the corporate general partner of
real estate limited partnerships, such as the Partnership, organized by one or
both of the individual General Partners. CNL Realty Corporation currently
serves as the corporate general partner of the CNL Income Fund Partnerships.
CNL Fund Advisors, Inc. provides certain management services in connection
with the Partnership and its Properties. CNL Fund Advisors, Inc. is a
corporation organized in 1994 under the laws of the State of Florida, and its
principal office is located at 450 South Orange Avenue, Orlando, Florida 32801.
CNL Fund Advisors, Inc. was a majority owned subsidiary of CNL Financial Group,
Inc., until its merger effective September 1, 1999. On September 1, 1999, CNL
American Properties Fund, Inc. acquired CNL Fund Advisors, Inc. and was
organized to perform property acquisition, property management and other
services.
CNL Financial Group, Inc., which was the parent company of CNL Fund
Advisors, Inc. through August 1999, was organized in 1980 under the laws of the
State of Florida. CNL Financial Group, Inc. is a diversified real estate
company which provides a wide range of real estate, development and financial
services to companies in the United States through the activities of its
subsidiaries. These activities are primarily focused on the franchised
restaurant and hospitality industries. James M. Seneff, Jr., an individual
General Partner of the Partnership, is the Chairman of the Board, Chief
Executive Officer, and a director of CNL Financial Group, Inc. Mr. Seneff and
his wife own all of the outstanding shares of CNL Holdings, Inc., the Parent
company of CNL Financial Group, Inc.
The following persons serve as operating officers of CNL Financial Group,
Inc. or its affiliates or subsidiaries in the discretion of the Boards of
Directors of those companies, but, except as specifically indicated, do not
serve as members of the Boards of Directors of those entities. The Boards of
Directors have the responsibility for creating and implementing the policies of
CNL Financial Group, Inc. and its affiliated companies.
Curtis B. McWilliams, age 44, joined CNL Financial Group, Inc. in April
1997 and served as an Executive Vice President through August 1999. He serves
as Chief Executive Officer of CNL American Properties Fund, Inc. and CNL Fund
Advisors, Inc. In addition, Mr. McWilliams served as President of CNL Fund
Advisors, Inc. and as President of the Restaurant and Financial Services Groups
within CNL Financial Group, Inc. through August 1999. Mr. McWilliams served as
President of CNL American Properties Fund, Inc. from February 1999 through
August 1999 and previously served as Executive Vice President from February 1998
through February 1999. From September 1983 through March 1997, Mr. McWilliams
was employed by Merrill Lynch & Co., most recently as Chairman of Merrill
Lynch's Private Advisory Services until March 1997. Mr. McWilliams received a
B.S.E. in Chemical Engineering from Princeton University in 1977 and a Masters
of Business Administration with a concentration in finance from the University
of Chicago in 1983.
John T. Walker, age 41, serves as President and Chief Operating Officer of
CNL American Properties Fund, Inc. and CNL Fund Advisors, Inc. He served as
Executive Vice President of CNL American Properties Fund, Inc. from January 1996
through August 1999, as Chief Operating Officer since March 1995 through August
1999, and previously served as Senior Vice President from December 1994 through
August 1999. In addition, Mr. Walker has served as Executive Vice President of
CNL Fund Advisors, Inc. since January 1996 through August 1999, Chief Operating
Officer from April 1995 through August 1999, and previously served as Senior
Vice President from November 1994 through January 1996. In addition, Mr. Walker
previously served as Executive Vice President of CNL Hospitality Properties,
Inc. and CNL Hospitality Advisors, Inc. As of September 1, 1999, Mr. Walker
serves as President for CNL American Properties Fund, Inc. From May 1992 to May
1994, Mr. Walker, a certified public accountant, was Executive Vice President
for Finance and Administration and Chief Financial Officer of Z Music, Inc., a
cable television network (subsequently acquired by Gaylord Entertainment), where
he was responsible for overall financial and administrative management and
planning. From January 1990 through April 1992, Mr. Walker was Chief Financial
Officer of the First Baptist Church in Orlando, Florida. From April 1984
through December 1989, he was a partner in the accounting firm of Chastang,
Ferrell & Walker, P.A., where he was the partner in charge of audit and
consulting services, and from 1981 to
36
<PAGE>
1984, Mr. Walker was a Senior Consultant/Audit Senior at Price Waterhouse. Mr.
Walker is a Cum Laude graduate of Wake Forest University with a B.S. in
Accountancy and is a certified public accountant.
Lynn E. Rose, age 51, Ms. Rose served as Secretary of CNL American
Properties Fund, Inc., a public, unlisted real estate investment trust, from
1994 through August 1999, and served as Treasurer from 1994 through February
1999. She also served as Treasurer of CNL Fund Advisors, Inc., from 1994
through July 1998, and served as Secretary and a director from 1994 through
August 1999, at which point it merged with CNL American Properties Fund, Inc.
In addition, she is Secretary and Treasurer of CNL Health Care Properties, Inc.,
and serves as Secretary of its subsidiaries. In addition, she serves as
Secretary, Treasurer and a director of CNL Health Care Corp., the advisor. to
the company. Ms. Rose also serves as Secretary and Treasurer of CNL Hospitality
Properties, Inc., a public, unlisted real estate investment trust, as Secretary,
Treasurer and a director of CNL Hospitality Corp., its Advisor, and as Secretary
of the subsidiaries of the company. Ms. Rose served as Secretary and Treasurer
of Commercial Net Lease Realty, Inc., a public real estate investment trust
listed on the New York Stock Exchange, from 1992 to February 1996, and as
Secretary and a director of CNL Realty Advisors, Inc., its advisor, from its
inception in 1991 through 1997. She also served as Treasurer of CNL Realty
Advisors, Inc. from 1991 through February 1996. Ms. Rose, a certified public
accountant, has served as Secretary of CNL Financial Group, Inc. (formerly CNL
Group, Inc.) since 1987, served as Controller from 1987 to 1993 and has served
as Chief Financial Officer since 1993. She also serves as Secretary of the
subsidiaries of CNL Financial Group, Inc. and holds various other offices in the
subsidiaries. In addition, she serves as Secretary for approximately 50
additional corporations affiliated with CNL Financial Group, Inc. and its
subsidiaries. Ms. Rose oversees the tax and legal compliance for over 375
corporations, partnerships and joint ventures, and the accounting and financial
reporting for over 200 entities. Prior to joining CNL, Ms. Rose was a partner
with Robert A. Bourne in the accounting firm of Bourne & Rose, P.A., Certified
Public Accountants. Ms. Rose holds a B.A. in Sociology from the University of
Central Florida. She was licensed as a certified public accountant in 1979.
Jeanne A. Wall, age 41, Ms. Wall served as Executive Vice President of CNL
American Properties Fund, Inc., a public, unlisted real estate investment trust,
from 1994 through August 1999, and as Executive Vice President of CNL Fund
Advisors, Inc., its advisor, from 1994 through August 1999, at which point it
merged with CNL American Properties Fund, Inc. Ms. Wall also serves as
Executive Vice President of CNL Health Care Properties, Inc. and CNL Health Care
Corp., the Advisor to the Company. Ms. Wall also serves as Executive Vice
President of CNL Hospitality Properties, Inc., a public, unlisted real estate
investment trust, and serves as Executive Vice President and a director of CNL
Hospitality Corp., its advisor. She also serves as a director for CNLBank. Ms.
Wall serves as Executive Vice President of CNL Financial Group, Inc. (formerly
CNL Group, Inc.). Ms. Wall has served as Chief Operating Officer of CNL
Investment Company and of CNL Securities Corp. since 1994 and has served as
Executive Vice President of CNL Investment Company since January 1991. In 1984,
Ms. Wall joined CNL Securities Corp. and in 1985, became Vice President. In
1987, she became a Senior Vice President and in July 1997, became Executive Vice
President of CNL Securities Corp. In this capacity, Ms. Wall serves as national
marketing and sales director and oversees the national marketing plan for the
CNL investment programs. In addition, Ms. Wall oversees product development,
communications and investor services for programs offered through participating
brokers. Ms. Wall also served as Senior Vice President of CNL Institutional
Advisors Inc., a registered investment advisor, from 1990 to 1993. Ms. Wall
served as Vice President of Commercial Net Lease Realty, Inc., a public real
estate investment trust listed on the New York Stock Exchange, from 1992 through
1997, and served as Vice President of CNL Realty Advisors, Inc. from its
inception in 1991 through 1997. Ms. Wall currently serves as a trustee on the
Board of the Investment Program Association, is a member of the Corporate
Advisory Council for the International Association for Financial Planning and is
a member of IWF, International Women's Forum. In addition, she previously
served on the Direct Participation Program committee for the National
Association of Securities Dealers, Inc. Ms. Wall holds a B.A. in Business
Administration from Linfield College and is a registered principal of CNL
Securities Corp.
Steven D. Shackelford, age 36, a certified public accountant, serves as
Senior Vice President, Chief Financial Officer, and Secretary of CNL American
Properties Fund, Inc. and CNL Fund Advisors, Inc. He served as Chief Financial
Officer of CNL American Properties Fund, Inc. from January 1997 and as Chief
Financial Officer of CNL Fund Advisors, Inc. since September 1996 through August
1999. From March 1995 to July 1996, Mr. Shackelford was a senior manager in the
national office of Price Waterhouse where he was responsible for advising
foreign clients seeking to raise capital and a public listing in the United
States. From August 1992 to March 1995, he served as a manager in the Price
Waterhouse, Paris, France office serving several multinational clients. Mr.
Shackelford was an audit staff and audit senior from 1986 to 1992 in the
Orlando, Florida office of Price Waterhouse. Mr. Shackelford received a B.A. in
Accounting, with honors, and a Masters of Business Administration from Florida
State University.
37
<PAGE>
Item 11. Executive Compensation
Other than as described in Item 13, the Partnership has not paid and does
not intend to pay any executive compensation to the General Partners or any of
their affiliates. There are no compensatory plans or arrangements regarding
termination of employment or change of control.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 15, 2000, no person was known to the Registrant to be a
beneficial owner of more than five percent of the Units.
The following table sets forth, as of March 15, 2000, the beneficial
ownership interests of the General Partners in the Registrant.
<TABLE>
<CAPTION>
Title of Class Name of Partner Percent of Class
-------------- --------------- ----------------
<S> <C> <C>
General Partnership Interests James M. Seneff, Jr. 45%
Robert A. Bourne 45%
CNL Realty Corporation 10%
------
100%
======
</TABLE>
Neither the General Partners, nor any of their affiliates, owns any
interest in the Registrant, except as noted above.
38
<PAGE>
Item 13. Certain Relationships and Related Transactions
The table below summarizes the types, recipients, methods of computation
and amounts of compensation, fees and distributions paid or payable by the
Partnership to the General Partners and their affiliates for the year ended
December 31, 1999, exclusive of any distributions to which the General Partners
or their affiliates may be entitled by reason of their purchase and ownership of
Units.
<TABLE>
<CAPTION>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1999
- ------------------------------- -------------------------------------- -------------------------------
<S> <C> <C>
Reimbursement to affiliates Operating expenses are reimbursed at Operating expenses incurred on
for operating expenses the lower of cost or 90 percent of behalf of the Partnership:
the prevailing rate at which $174,509
comparable services could have been
obtained in the same geographic area. Accounting and administrative
Affiliates of the General Partners services: $121,160
from time to time incur certain
operating expenses on behalf of the
Partnership for which the Partnership
reimburses the affiliates without
interest.
Annual management fee to One percent of the sum of gross $36,152
affiliates revenues from Properties wholly owned
by the Partnership plus the
Partnership's allocable share of
gross revenues of joint ventures in
which the Partnership is a
co-venturer and the property owned
with an affiliate as
tenants-in-common. The management
fee, which will not exceed
competitive fees for comparable
services in the same geographic area,
may or may not be taken, in whole or
in part as to any tear, in the sole
discretion of affiliates of the
General Partners. All or any portion
of the management fee not taken as to
any fiscal year shall be deferred
without interest and may be taken in
such other fiscal year as the
affiliates shall determine.
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
Amount Incurred
Type of Compensation For the Year
and Recipient Method of Computation Ended December 31, 1999
- ------------------------------- -------------------------------------- -------------------------------
<S> <C> <C>
Deferred, subordinated real A deferred, subordinated real estate $-0-
estate disposition fee disposition fee, payable upon sale of
payable to affiliates one or more Properties, in an amount
equal to the lesser of (i) one-half
of a competitive real estate
commission, or (ii) three percent of
the sales price of such Property or
Properties. Payment of such fee
shall be made only if affiliates of
the General Partners provide a
substantial amount of services in
connection with the sale of a
Property or Properties and shall be
subordinated to certain minimum
returns to the Limited Partners.
However, if the net sales proceeds
are reinvested in a replacement
Property, no such real estate
disposition fee will be incurred
until such replacement Property is
sold and the net sales proceeds are
distributed.
General Partners' deferred, A deferred, subordinated share equal $-0-
subordinated share of to one percent of Partnership
Partnership net cash flow distributions of net cash flow,
subordinated to certain minimum
returns to the Limited Partners.
General Partners' deferred, A deferred, subordinated share equal $-0-
subordinated share of to five percent of Partnership
Partnership net sales distributions of such net sales
proceeds from a sale or sales proceeds, subordinated to certain
not in liquidation of the minimum returns to the Limited
Partnership Partners.
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
Amount Incurred
Type of Compensation For the Year
And Recipient Method of Computation Ended December 31, 1999
- ------------------------------- -------------------------------------- -------------------------------
<S> <C> <C>
General Partners' share of Distributions of net sales proceeds $-0-
Partnership net sales from a sale or sales of substantially
proceeds from a sale or sales all of the Partnership's assets will
in liquidation of the be distributed in the following order
Partnership or priority: (i) first, to pay all
debts and liabilities of the
Partnership and to establish
reserves; (ii) second, to Partners
with positive capital account
balances, determined after the
allocation of net income, net loss,
gain and loss, in proportion to such
balances, up to amounts sufficient to
reduce such balances to zero; and
(iii) thereafter, 95% to the Limited
Partners and 5% to the General
Partners.
</TABLE>
41
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report.
1. Financial Statements
Report of Independent Certified Public Accountants
Balance Sheets at December 31, 1999 and 1998
Statements of Income for the years ended December 31, 1999, 1998, and
1997
Statements of Partners' Capital for the years ended December 31, 1999,
1998, and 1997
Statements of Cash Flows for the years ended December 31, 1999, 1998,
and 1997
Notes to Financial Statements
2. Financial Statement Schedule
Schedule III - Real Estate and Accumulated Depreciation at December
31, 1999
Notes to Schedule III - Real Estate and Accumulated Depreciation at
December 31, 1999
All other Schedules are omitted as the required information is
inapplicable or is presented in the financial statements or notes
thereto.
3. Exhibits
3.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund XIII, Ltd. (Included as Exhibit 3.2 to Registration
Statement No. 33-53672-01 on Form S-11 and incorporated herein by
reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL Income
Fund XIII, Ltd. (Included as Exhibit 3.2 to Registration
Statement No. 33-53672-01 on Form S-11 and incorporated herein by
reference.)
4.2 Amended and Restated Agreement of Limited Partnership of CNL
Income Fund XIII, Ltd. (Included as Exhibit 4.2 to Form 10-K
filed with the Securities and Exchange Commission on March 31,
1994, incorporated herein by reference.)
10.1 Management Agreement between CNL Income Fund XIII, Ltd. and CNL
Investment Company (Included as Exhibit 10.1 to Form 10-K filed
with the Securities and Exchange Commission on March 31, 1994,
and incorporated herein by reference.)
10.2 Assignment of Management Agreement from CNL Investment Company
to CNL Income Fund Advisors, Inc. (Included as exhibit 10.2 to
Form 10-K filed with the Securities and Exchange Commission on
March 30, 1995, and incorporated herein by reference.)
42
<PAGE>
10.3 Assignment of Management Agreement from CNL Income Fund
Advisors, Inc. to CNL Fund Advisors, Inc. (Included as Exhibit
10.3 to Form 10-K filed with the Securities and Exchange
Commission on April 1, 1996, and incorporated herein by
reference.)
27 Financial Data schedule (Filed herewith.)
(b) The Registrant filed no reports on Form 8-K during the period October 1,
1999 through December 31, 1999.
43
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 24th day of
March, 2000.
CNL INCOME FUND XIII, LTD.
By: CNL REALTY CORPORATION
General Partner
/s/ Robert A. Bourne
----------------------------------
ROBERT A. BOURNE, President
By: ROBERT A. BOURNE
General Partner
/s/ Robert A. Bourne
----------------------------------
ROBERT A. BOURNE
By: JAMES M. SENEFF, JR.
General Partner
/s/ James M. Seneff, Jr.
----------------------------------
JAMES M. SENEFF, JR.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Robert A. Bourne President, Treasurer and Director March 24, 2000
- -------------------------
Robert A. Bourne (Principal Financial and Accounting
Officer)
/s/ James M. Seneff, Jr. Chief Executive Officer and Director March 24, 2000
- -------------------------
James M. Seneff, Jr. (Principal Executive Officer)
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
-----------------------------------------------
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Additions Deductions
------------------------ --------------------------
Collected
or Deter-
Balance at Charged to Charged to Deemed mined to Balance
Beginning Costs and Other Uncollec- be Col- at End
Year Description of Year Expenses Accounts tible lectible of Year
- ------ -------------- ---------- ---------- ---------- --------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 Allowance for
doubtful
accounts (a) $ 223,468 $ -- $ -- (b) $ 223,468 (c) $ -- $ --
========== ========== ========== ========= ========= =======
1998 Allowance for
doubtful
accounts (a) $ -- $ -- $ 532 (b) $ -- (c) $ -- $ 532
========== ========== ========== ========= ========= =======
1999 Allowance for
doubtful
accounts (a) $ 532 $ -- $ -- (b) $ -- (c) $ 532 $ --
========== ========== ========== ========= ========= =======
</TABLE>
(a) Deducted from receivables and accrued rental income on the balance sheet.
(b) Reduction of rental, earned and other income.
(c) Amounts written off as uncollectible.
F-1
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent to
Initial Cost Acquisition
---------------------------- -------------------------
Encum- Buildings and Improve- Carrying
brances Land Improvements ments Costs
--------- -------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Properties the Partnership
has Invested in Under
Operating Leases:
Burger King Restaurants:
Cincinnati, Ohio - $256,901 $669,537 - -
Dayton, Ohio - 211,835 771,616 - -
Lafayette, Indiana - 247,183 723,304 - -
Pineville, Louisiana - 174,843 618,815 - -
Checkers Drive-In Restaurants:
Houston, Texas - 445,389 - - -
Port Richey, Florida - 380,055 - - -
Pensacola, Florida - 280,409 - - -
Orlando, Florida - 424,323 - - -
Boca Raton, Florida - 501,416 - - -
Venice, Florida - 374,675 - - -
Woodstock, Georgia - 386,638 - - -
Lakeland, Florida - 326,175 - - -
Denny's Restaurants:
Peoria, Arizona - 460,107 - - -
Mesa, Arizona - 530,494 - 540,983 -
Golden Corral Family
Steakhouse Restaurants:
Dallas, Texas - 611,589 1,071,838 - -
San Antonio, Texas - 625,527 964,122 - -
Panama City, Florida - 617,016 - 1,103,437 -
Hardee's Restaurants:
Ashland, Alabama - 197,336 417,418 - -
Bloomingdale, Tennessee - 160,149 424,977 - -
Blytheville, Arkansas - 164,004 - - -
Chapin, South Carolina - 218,639 460,364 - -
Kingsport, Tennessee - 204,516 - - -
Opelika, Alabama - 240,363 412,621 - -
Spartanburg, South Carolina - 226,815 431,574 - -
Jack in the Box Restaurants:
Sacramento, California - 323,929 601,054 - -
Houston, Texas - 315,842 590,708 - -
<CAPTION>
Gross Amount at Which
Carried at Close of Period (c)
------------------------------------
Date
Buildings and Accumulated of Con- Date
Land Improvements Total Depreciation struction Acquired
-------- ------------- ---------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
Properties the Partnership
has Invested in Under
Operating Leases:
Burger King Restaurants:
Cincinnati, Ohio $256,901 $ 669,537 $ 926,438 $143,385 1988 07/93
Dayton, Ohio 211,835 771,616 983,451 165,246 1988 07/93
Lafayette, Indiana 247,183 723,304 970,487 154,899 1989 07/93
Pineville, Louisiana 174,843 618,815 793,658 132,523 1990 07/93
Checkers Drive-In Restaurants:
Houston, Texas 445,389 - 445,389 (g) - 03/94
Port Richey, Florida 380,055 - 380,055 (g) - 03/94
Pensacola, Florida 280,409 - 280,409 (g) - 03/94
Orlando, Florida 424,323 - 424,323 (g) - 03/94
Boca Raton, Florida 501,416 - 501,416 (g) - 03/94
Venice, Florida 374,675 - 374,675 (g) - 03/94
Woodstock, Georgia 386,638 - 386,638 (g) - 10/94
Lakeland, Florida 326,175 - 326,175 (g) - 04/95
Denny's Restaurants:
Peoria, Arizona 460,107 (f) 460,107 - 1994 10/93
Mesa, Arizona 530,494 540,983 1,071,477 101,700 1994 12/93
Golden Corral Family
Steakhouse Restaurants:
Dallas, Texas 611,589 1,071,838 1,683,427 236,685 1991 05/93
San Antonio, Texas 625,527 964,122 1,589,649 211,667 1993 06/93
Panama City, Florida 617,016 1,103,437 1,720,453 213,205 1994 11/93
Hardee's Restaurants:
Ashland, Alabama 197,336 417,418 614,754 89,392 1992 07/93
Bloomingdale, Tennessee 160,149 424,977 585,126 91,011 1992 07/93
Blytheville, Arkansas 164,004 (f) 164,004 - 1991 07/93
Chapin, South Carolina 218,639 460,364 679,003 98,589 1993 07/93
Kingsport, Tennessee 204,516 (f) 204,516 - 1992 07/93
Opelika, Alabama 240,363 412,621 652,984 88,365 1992 07/93
Spartanburg, South Carolina 226,815 431,574 658,389 92,424 1993 07/93
Jack in the Box Restaurants:
Sacramento, California 323,929 601,054 924,983 130,366 1992 06/93
Houston, Texas 315,842 590,708 906,550 126,557 1993 07/93
<CAPTION>
Life on Which
Depreciation in
Latest Income
Statement is
Computed
---------------
<S> <C>
Properties the Partnership
has Invested in Under
Operating Leases:
Burger King Restaurants:
Cincinnati, Ohio (b)
Dayton, Ohio (b)
Lafayette, Indiana (b)
Pineville, Louisiana (b)
Checkers Drive-In Restaurants:
Houston, Texas (g)
Port Richey, Florida (g)
Pensacola, Florida (g)
Orlando, Florida (g)
Boca Raton, Florida (g)
Venice, Florida (g)
Woodstock, Georgia (g)
Lakeland, Florida (g)
Denny's Restaurants:
Peoria, Arizona (d)
Mesa, Arizona (b)
Golden Corral Family
Steakhouse Restaurants:
Dallas, Texas (b)
San Antonio, Texas (b)
Panama City, Florida (b)
Hardee's Restaurants:
Ashland, Alabama (b)
Bloomingdale, Tennessee (b)
Blytheville, Arkansas (d)
Chapin, South Carolina (b)
Kingsport, Tennessee (d)
Opelika, Alabama (b)
Spartanburg, South Carolina (b)
Jack in the Box Restaurants:
Sacramento, California (b)
Houston, Texas (b)
</TABLE>
F-2
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent To
Initial Cost Acquisition
------------------------------- -----------------------
Encum- Buildings and Improve- Carrying
brances Land Improvements ments Costs
---------- ------------- ----------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Arlington, Texas - 404,752 592,173 - -
Lions Choice Restaurant:
Overland Park, Kansas - 452,691 - - -
Long John Silver's Restaurants:
Penn Hills, Pennsylvania (k) - 292,370 356,444 - -
Philadelphia, Pennsylvania (j) - 274,580 - 504,838 -
Arlington, Texas - 362,939 - - -
Johnstown, Pennsylvania - 254,412 - - -
Orlando, Florida - 299,696 139,676 - -
Austin, Texas - 463,937 - - -
Steak -n- Shake Restaurant:
Tampa, Florida - 372,748 - - -
Wendy's Old Fashioned Hamburger
Restaurant:
Salisbury, Maryland - 290,195 641,710 - -
------------- ----------------- ----------- -----------
$12,374,488 $9,887,951 $2,149,258 -
============= ================= =========== ===========
Property of Joint Venture in
Which the Partnership has
a 50% Interest and has
Invested in Under an
Operating Lease:
Hardee's Restaurant:
Attalla, Alabama - $196,274 $434,428 - -
============= ================= =========== ===========
<CAPTION>
Gross Amount at Which Life on Which
Carried at Close of Period (c) Depreciation in
------------------------------------------
Date Lates Income
Buildings and Accumulated of Con- Date Statement is
Land Improvements Total Depreciation struction Acquired Computed
------------ --------------- ------------- -------------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Arlington, Texas 404,752 592,173 996,925 126,817 1993 08/93 (b)
Lions Choice Restaurant:
Overland Park, Kansas 452,691 (f) 452,691 - 1993 12/93 (d)
Long John Silver's Restaurants:
Penn Hills, Pennsylvania (k) 292,370 356,444 648,814 3,725 1993 07/93 (k)
Philadelphia, Pennsylvania (j) 274,580 504,838 779,418 21,676 1993 07/93 (i)
Arlington, Texas 362,939 (f) 362,939 - 1993 08/93 (d)
Johnstown, Pennsylvania 254,412 (f) 254,412 - 1993 08/93 (d)
Orlando, Florida 299,696 139,676 439,372 28,599 1983 11/93 (b)
Austin, Texas 463,937 (f) 463,937 - 1993 12/93 (d)
Steak -n- Shake Restaurant:
Tampa, Florida 372,748 (f) 372,748 - 1994 12/93 (d)
Wendy's Old Fashioned Hamburger
Restaurant:
Salisbury, Maryland 290,195 641,710 931,905 127,155 1993 01/94 (b)
------------ --------------- ------------- --------------
$12,374,488 $12,037,209 $24,411,697 $2,383,986
============ =============== ============= ==============
Property of Joint Venture in
Which the Partnership has
a 50% Interest and has
Invested in Under an
Operating Lease:
Hardee's Restaurant:
Attalla, Alabama $196,274 $434,428 $630,702 $87,599 1993 11/93 (b)
============ =============== ============= ==============
</TABLE>
F-3
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent To
Initial Cost Acquisition
----------------------------------- -----------------------------------
Encum- Buildings and Improve- Carrying
brances Land Improvements ments Costs
---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Property in Which the Partnership
has a 66.13% Interest as Tenants-
In-Common and has Invested in
Under an Operating Lease:
Arby's Restaurant:
Arvada, Colorado - $260,439 $545,126 - -
================ ================ ================ ================ ================
Property of Joint Venture in
Which the Partnership has a
27.8% Interest and has Invested
in Under an Operating Lease:
Denny's Restaurant:
Salem, Ohio - $131,762 - - -
================ ================ ================ ================ ================
Property in Which the Partnership
has a 63.09% Interest as Tenants-
In-Common and has Invested in
Under an Operating Lease:
Burger King Restaurant:
Akron, Ohio (h) - $355,595 $517,030 - -
================ ================ ================ ================ ================
Property in Which the Partnership
has a 47.83% Interest as Tenants-
in-Common and has Invested
in Under an Operating Lease:
Chevy's Fresh Mex Restaurant:
Smithfield, North Carolina - $976,357 $974,016 - -
================ ================ ================ ================ ================
<CAPTION>
Gross Amount at Which
Carried at Close of Period (c)
------------------------------------------------------
Buildings and Accumulated
Land Improvements Total Depreciation
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Property in Which the Partnership
has a 66.13% Interest as Tenants-
In-Common and has Invested in
Under an Operating Lease:
Arby's Restaurant:
Arvada, Colorado $260,439 $545,126 $ 805,565 $95,882
================ ================ ================ ================
Property of Joint Venture in
Which the Partnership has a
27.8% Interest and has Invested
in Under an Operating Lease:
Denny's Restaurant:
Salem, Ohio $131,762 (f) $ 131,762 -
================ ================ ================ ================
Property in Which the Partnership
has a 63.09% Interest as Tenants-
In-Common and has Invested in
Under an Operating Lease:
Burger King Restaurant:
Akron, Ohio (h) $355,595 $517,030 $ 872,625 $50,456
================ ================ ================ ================
Property in Which the Partnership
has a 47.83% Interest as Tenants-
in-Common and has Invested
in Under an Operating Lease:
Chevy's Fresh Mex Restaurant:
Smithfield, North Carolina $976,357 $974,016 $1,950,373 $65,022
================ ================ ================ ================
<CAPTION>
Life on Which
Depreciation in
Date Latest Income
of Con- Date Statement is
struction Acquired Computed
---------------- ----------------- ----------------
<S> <C> <C> <C>
Property in Which the Partnership
has a 66.13% Interest as Tenants-
In-Common and has Invested in
Under an Operating Lease:
Arby's Restaurant:
Arvada, Colorado 1994 09/94 (b)
Property of Joint Venture in
Which the Partnership has a
27.8% Interest and has Invested
in Under an Operating Lease:
Denny's Restaurant:
Salem, Ohio 1991 03/95 (d)
Property in Which the Partnership
has a 63.09% Interest as Tenants-
In-Common and has Invested in
Under an Operating Lease:
Burger King Restaurant:
Akron, Ohio (h) 1970 01/97 (b)
Property in Which the Partnership
has a 47.83% Interest as Tenants-
in-Common and has Invested
in Under an Operating Lease:
Chevy's Fresh Mex Restaurant:
Smithfield, North Carolina 1995 12/97 (b)
</TABLE>
F-4
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent To
Initial Cost Acquisition
------------------------------- ----------------------
Encum- Buildings and Improve- Carrying
brances Land Improvements ments Costs
-------------- ------------ ---------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Properties the Partnership has
Invested in Under Direct
Financing Leases
Denny's Restaurant
Peoria, Arizona - - - $ 613,090 -
Hardee's Restaurants
Blytheville, Arkansas - - $ 450,014 - -
Huntingdon, Tennessee - $ 100,836 427,932 - -
Kingsport, Tennessee - - 484,785 - -
Parsons, Tennessee - 101,332 409,671 - -
Trenton, Tennessee - 147,232 442,640 - -
Jack in the Box Restaurant:
Cleburne, Texas - 145,890 496,797 - -
Lion's Choice Restaurant:
Overland Park, Kansas - - 611,694 - -
Long John Silver's Restaurants:
Arlington, Texas - - 449,369 - -
Johnstown, Pennsylvania - - - 427,552 -
Austin, Texas - - 517,109 - -
Quincy's Restaurant:
Mount Airy, North Carolina - 212,852 827,991 - -
Steak-n-Shake Restaurant:
Tampa, Florida - - - 537,404 -
------------- ---------------- ---------- -----------
$ 708,142 $5,118,002 $1,578,046 -
============= ================ ========== ===========
<CAPTION>
Gross Amount at Which
Carried at Close of Period (c) Date
----------------------------------------------------
Buildings and Accumulated of Con- Date
Land Improvements Total Depreciation struction Acquired
-------------- ------------------ --------------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Properties the Partnership has
Invested in Under Direct
Financing Leases
Denny's Restaurant
Peoria, Arizona - (f) (f) (d) 1994 10/93
Hardee's Restaurants
Blytheville, Arkansas - (f) (f) (d) 1991 07/93
Huntingdon, Tennessee (f) (f) (f) (e) 1992 07/93
Kingsport, Tennessee - (f) (f) (d) 1992 07/93
Parsons, Tennessee (f) (f) (f) (e) 1992 07/93
Trenton, Tennessee (f) (f) (f) (e) 1992 07/93
Jack in the Box Restaurant:
Cleburne, Texas (f) (f) (f) (e) 1988 11/93
Lion's Choice Restaurant:
Overland Park, Kansas - (f) (f) (d) 1993 12/93
Long John Silver's Restaurants:
Arlington, Texas - (f) (f) (d) 1993 08/93
Johnstown, Pennsylvania - (f) (f) (d) 1993 08/93
Austin, Texas - (f) (f) (d) 1993 12/93
Quincy's Restaurant:
Mount Airy, North Carolina (f) (f) (f) (e) 1992 07/93
Steak-n-Shake Restaurant:
Tampa, Florida - (f) (f) (d) 1994 12/93
<CAPTION>
Life on Which
Depreciation in
Latest Income
Statement is
Computed
-------------------
<S> <C>
Properties the Partnership has
Invested in Under Direct
Financing Leases
Denny's Restaurant
Peoria, Arizona (d)
Hardee's Restaurants
Blytheville, Arkansas (d)
Huntingdon, Tennessee (e)
Kingsport, Tennessee (d)
Parsons, Tennessee (e)
Trenton, Tennessee (e)
Jack in the Box Restaurant:
Cleburne, Texas (e)
Lion's Choice Restaurant:
Overland Park, Kansas (d)
Long John Silver's Restaurants:
Arlington, Texas (d)
Johnstown, Pennsylvania (d)
Austin, Texas (d)
Quincy's Restaurant:
Mount Airy, North Carolina (e)
Steak-n-Shake Restaurant:
Tampa, Florida (d)
</TABLE>
F-5
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent To
Initial Cost Acquisition
-------------------------------------- ------------------------------
Encum- Buildings and Improve- Carrying
brances Land Improvements ments Costs
----------------- ------------------ ----------------- ----------------- ----------
<S> <C> <C> <C> <C> <C>
Property of Joint Venture in
Which the Partnership has a
27.8% Interest and has Invested
in Under Direct Financing Lease:
Denny's Restaurant:
Salem, Ohio - - $371,836 - -
================== ================= ================= ==========
<CAPTION>
Gross Amount at Which
Carried at Close of Period (c)
------------------------------------------------------------
Buildings and
Land Improvements Total
------------------ ------------------ ------------------
<S> <C> <C> <C>
Property of Joint Venture in
Which the Partnership has a
27.8% Interest and has Invested
in Under Direct Financing Lease:
Denny's Restaurant:
Salem, Ohio - (f) (f)
<CAPTION>
Life on Which
Depreciation in
Date Latest Income
Accumulated of Con- Date Statement is
Depreciation struction Acquired Computed
---------------- ----------- ----------- -------------------
<S> <C> <C> <C> <C>
Property of Joint Venture in
Which the Partnership has a
27.8% Interest and has Invested
in Under Direct Financing Lease:
Denny's Restaurant:
Salem, Ohio (d) 1991 03/95 (d)
</TABLE>
F-6
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
----------------------------------------------------------------
December 31, 1999
(a) Transactions in real estate and accumulated depreciation during 1999, 1998,
and 1997 are summarized as follows:
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
----------- ------------
<S> <C> <C>
Properties the Partnership has invested in Under Operating Leases:
Balance, December 31, 1996 $24,918,525 $ 1,305,886
Disposition (432,587) --
Depreciation expense -- 391,434
----------- ------------
Balance, December 31, 1997 24,485,938 1,697,320
Reclassified from net investment in direct financing lease 864,929 (11,536)
Depreciation Expense -- 421,840
----------- ------------
Balance, December 31, 1998 25,350,867 2,107,624
Disposition (935,524) (112,983)
Reclassified from net investment in direct financing lease 356,444 --
Reclassified to net investment in direct financing lease (360,090) (7,805)
Depreciation expense -- 397,150
----------- ------------
Balance, December 31, 1999 (j) $24,411,697 $ 2,383,986
=========== ============
Property of Joint Venture in Which the Partnership has a 50%
Interest and has Invested in Under an Operating Lease:
Balance, December 31, 1996 $ 630,702 $ 44,156
Depreciation expense -- 14,482
----------- ------------
Balance, December 31, 1997 630,702 58,638
Depreciation expense -- 14,480
----------- ------------
Balance, December 31, 1998 630,702 73,118
Depreciation expense -- 14,481
----------- ------------
Balance, December 31, 1999 $ 630,702 $ 87,599
=========== ============
</TABLE>
F-7
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
--------------------------------------------------
DEPRECIATION - CONTINUED
------------------------
December 31, 1999
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
------------ ------------
<S> <C> <C>
Property in Which the Partnership has a 66.13% Interest
as Tenants-in-Common and has Invested in Under an
Operating Lease:
Balance, December 31, 1996 $ 805,565 $ 41,370
Depreciation expense -- 18,171
------------ ------------
Balance, December 31, 1997 805,565 59,541
Depreciation expense -- 18,171
------------ ------------
Balance, December 31, 1998 805,565 77,712
Depreciation expense -- 18,170
------------ ------------
Balance, December 31, 1999 $ 805,565 $ 95,882
============ ============
Property of Joint Venture in Which the Partnership has a
27.8% Interest and has Invested in Under a Direct
Financing Lease:
Balance, December 31, 1996 $ 131,762 $ --
Depreciation expense (d) -- --
------------ ------------
Balance, December 31, 1997 131,762 --
Depreciation expense (d) -- --
------------ ------------
Balance, December 31, 1998 131,762 --
Depreciation expense (d) -- --
------------ ------------
Balance, December 31, 1999 $ 131,762 $ --
============ ============
</TABLE>
F-8
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
---------------------------------------------------
DEPRECIATION - CONTINUED
------------------------
December 31, 1999
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation
-------------- --------------
<S> <C> <C>
Property in Which the Partnership has a 63.09% Interest as
Tenants-In-Common and has Invested in Under an Operating Lease:
Balance, December 31, 1996 $ -- $ --
Acquisition 872,625 --
Depreciation expense -- 15,898
-------------- -------------
Balance, December 31, 1997 872,625 15,898
Depreciation expense -- 17,323
-------------- -------------
Balance, December 31, 1998 872,625 33,221
Depreciation expense -- 17,235
-------------- -------------
Balance, December 31, 1999 $ 872,625 $ 50,456
============== =============
Property in Which the Partnership has a 47.83% Interest as
Tenants-In-Common has invested in Under an Operating Lease:
Balance, December 31, 1996 $ -- $ --
Acquisition 1,950,373 --
Depreciation expense -- 89
-------------- -------------
Balance, December 31, 1997 1,950,373 89
Depreciation expense -- 32,467
-------------- -------------
Balance, December 31, 1998 1,950,373 32,556
Depreciation expense -- 32,466
-------------- -------------
Balance, December 31, 1999 $ 1,950,373 $ 65,022
============== =============
</TABLE>
(b) Depreciation expense is computed for buildings and improvements based upon
estimated lives of 30 years.
(c) As of December 31, 1999, the aggregate cost of the Properties owned by the
Partnership and joint ventures (including the Property owned as tenants-
in-common) for federal income tax purposes was $32,701,008 and $3,957,298,
respectively. All of the leases are treated as operating leases for
federal income tax purposes.
(d) For financial reporting purposes, the portion of the lease relating to the
building has been recorded as a direct financing lease. The cost of the
building has been included in net investment in direct financing leases;
therefore, depreciation is not applicable.
F-9
<PAGE>
CNL INCOME FUND XIII, LTD.
(A Florida Limited Partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED
---------------------------------------------------
DEPRECIATION - CONTINUED
------------------------
December 31, 1999
(e) For financial reporting purposes, the lease for the land and building has
been recorded as a direct financing lease. The cost of the land and
building has been included in the net investment in direct financing
leases; therefore, depreciation is not applicable.
(f) For financial reporting purposes, certain components of the lease relating
to land and building have been recorded as a direct financing lease.
Accordingly, costs relating to these components of this lease are not
shown.
(g) The building portion of this Property is owned by the tenant; therefore,
depreciation is not applicable.
(h) During the year ended December 31, 1997, the Partnership and an affiliate
as tenant-in-common, purchased land and building from CNL BB Corp., and
affiliate of the General Partners, for an aggregate cost of $872,625.
(i) Effective June 1998, the lease for this Property was terminated, resulting
in the reclassification of the building portion of the lease as an
operating lease. The building was recorded at net book value and will be
depreciated over its remaining estimated life of approximately 26 years.
(j) For financial reporting purposes, the undepreciated cost of the Property in
Philadelphia, Pennsylvania, was reduced to its estimated net realizable
value due to an impairment in value. The Partnership recognized the
impairment by recording an allowance for loss on building in the amount of
$297,885 at December 31, 1998. The impairment at December 31, 1998
represents the difference between the Property's carrying value and the
General Partners' estimate of the net realizable value of the Property
based on an anticipated sales price of this Property to an interested and
unrelated third party. The cost of the Property presented on this schedule
is the gross amount at which the Property was carried at December 31, 1999,
excluding the allowance for loss on building.
(k) Effective October 1999, the lease for this Property was amended resulting
in the reclassification of the building portion of the lease as an
operating lease. The building was recorded at net book value and
depreciated over its remaining estimated life of approximately 24 years.
F-10
<PAGE>
EXHIBIT INDEX
Exhibit Number
--------------
3.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund XIII, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-53672-01 on Form S-11 and
incorporated herein by reference.)
4.1 Affidavit and Certificate of Limited Partnership of CNL
Income Fund XIII, Ltd. (Included as Exhibit 3.2 to
Registration Statement No. 33-53672-01 on Form S-11 and
incorporated herein by reference.)
4.2 Amended and Restated Agreement of Limited Partnership
of CNL Income Fund XIII, Ltd. ( Included as Exhibit 4.2
to Form 10-K filed with the Securities and Exchange
Commission on March 31, 1994, incorporated herein by
reference.)
10.1 Management Agreement between CNL Income Fund XIII, Ltd.
and CNL Investment Company (Included as Exhibit 10.1 to
Form 10-K filed with the Securities and Exchange
Commission on March 31, 1994, and incorporated herein
by reference.)
10.2 Assignment of Management Agreement from CNL Investment
Company to CNL Income Fund Advisors, Inc. (Included as
exhibit 10.2 to Form 10-K filed with the Securities and
Exchange Commission on March 30, 1995, and incorporated
herein by reference.)
10.3 Assignment of Management Agreement from CNL Income Fund
Advisors, Inc. to CNL Fund Advisors, Inc. (Included as
Exhibit 10.3 to Form 10-K filed with the Securities and
Exchange Commission on April 1, 1996, and incorporated
herein by reference.)
27 Financial Data schedule (Filed herewith.)
1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet of CNL Income Fund XIII, Ltd. at December 31, 1999, and its statement of
income for the twelve months then ended and is qualified in its entirety by
reference to the Form 10-K of CNL Income Fund XIII, Ltd. for the twelve months
ended December 31, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 945,802
<SECURITIES> 0
<RECEIVABLES> 135,432
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 24,546,812
<DEPRECIATION> 2,383,986
<TOTAL-ASSETS> 34,337,261
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 33,030,560
<TOTAL-LIABILITY-AND-EQUITY> 34,337,261
<SALES> 0
<TOTAL-REVENUES> 3,477,576
<CGS> 0
<TOTAL-COSTS> 862,443
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,681,165
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,681,165
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,681,165
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>Due to the nature of its industry, CNL Income Fund XIII, Ltd. has an
unclassified balance sheet; therefore, no values are shown above for current
assets and current liabilities.
</FN>
</TABLE>
